Nifty had been trading above its 21-day exponential moving average (EMA) since November 3, 2020, on the daily timeframe. But on January 27, 2021, the benchmark index witnessed a negative opening below its 21-day EMA tracking weakness in global peers and witnessed selling pressure throughout the day.
Since November 20, prices had been within a rising channel pattern but on Wednesday, the benchmark index witnessed a negative breakdown of a rising channel pattern on the daily interval.
The breach of 21-day EMA along with a cluster of channel pattern breakdown indicates Nifty may trade with a bearish bias for another few trading sessions.
Currently, India VIX is near its horizontal trendline resistance which is placed at 25.20 level on the daily chart. If India VIX chart witnesses a breakout above its resistance level, Nifty may sail through the sharp volatility with a bearish bias.
Bank Nifty has witnessed a four-month-long rising channel pattern breakdown on the daily interval and it has closed below its 21-day exponential moving average.
It has formed a bearish double top pattern on the weekly timeframe which indicates we may witness sharp profit-booking in the coming sessions if prices don’t close above the pattern.
As Nifty has given a negative breakdown, every uptick in the index should be utilised for a fresh shorting opportunity.
Nifty may face a strong resistance near 14,250 which is capped under 21-day EMA. On the lower side, support can be seen at 13,700.
Here is one buy and two sell calls for the next 2-3 weeks:
United Breweries | Buy | LTP: Rs 1,310 | Target price: Rs 1,385 | Stop loss: Rs 1,248 | Upside: 6%
The stock has taken firm support near its 21-day exponential moving average on the daily timeframe and is looking to accelerate higher.
The counter is trading in a higher high higher bottom formation and has retraced 23.60 percent from its previous intermediate bottom on the daily timeframe.
Positive divergences on secondary oscillators with rising volumes suggest that the up-move could continue in the coming sessions as well.
Divi's Laboratories | Sell | LTP: Rs 3,480 | Target price: Rs 3,305 | Stop loss: Rs 3,585 | Downside: 5%
On the daily timeframe, the stock has witnessed a rising channel pattern breakdown and is trading below its trendline support.
It has closed below its 21 and 50-day exponential moving averages on the daily chart which is negative for the counter in the short-term.
Momentum oscillator RSI (14) has closed below its horizontal trendline support with a negative crossover which is placed near 58 levels on the daily interval.
Jubilant FoodWorks | Sell | LTP: Rs 2,638.05 | Target price: Rs 2,495 | Stop loss: Rs 2,720 | Downside: 5%
The stock has witnessed a failure of a higher high higher bottom formation and it breached its rising channel pattern on the daily interval.
The counter is trading below its 21-day exponential moving average on the daily chart, which is negative for the stock in the near-term.
The stock has formed a bearish engulfing candlestick pattern on the weekly chart and is trading below the same which further confirms the current bearish setup.
(The author is a technical analyst at Bonanza Portfolio)Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.