Rohan Patil, Technical Analyst at Bonanza Portfolio
The 50-share broader index Nifty50 has been trading in a rising channel formation since July 28 and registered its lifetime high of 17,947.65 on September 24. It has given a return of 15 percent in just three months. The benchmark index on September 30 broke the lower band of the rising channel pattern and witnessed a breakdown of a rising channel pattern on the daily time frame.
After breakout of a rising channel pattern, the price has completed its pullback in the next two trading sessions towards its lower band of the pattern which was placed near 17,850 levels.
On October 6, Nifty50 witnessed a gap-up opening following its global peers but couldn't hold on to its initial gains and slipped sharply after forming a double-top pattern on the intraday chart. Prices have also engulfed its previous day's candle and have formed a Bearish Engulfing Candlestick pattern on the daily time frame.
On the weekly chart, prices have formed a Bearish Dark Cloud Cover Candlestick pattern and prices have slipped almost one-and-a-half percent from their all-time highs. On the indicator front, the daily RSI (relative strength index) was at 58 and showed a bearish divergence with negative crossover, where the price had scaled higher highs but RSI made a lower high.
As of now, prices are showing the sign of profit-booking or short-term bearish trend. The immediate support for the Nifty is placed at 17,450 levels. In case this support is broken, then the gate is open wide till 17,000 mark. The resistance is placed near the top of the Bearish Engulfing pattern near 17,850.
Here are two buy calls and one sell call for next 2-3 weeks:
Piramal Enterprises: Buy | LTP: Rs 2,842 | Stop Loss: Rs 2,755 | Target: Rs 2,985 | Return: 5 percent
The prices were trading in a rectangle formation since the past two months and have formed a trend line resistance at Rs 2,800 levels.
Piramal Enterprises has broken out of a rectangle pattern at Rs 2,800 levels on October 5 and the prices have registered a decisive breakout that suggests a change in the trend from sideways to upside.
The stock is trading above its 21, 50 and 100-day exponential moving averages on a daily time frame, which is positive for the prices in the near term.
MACD indicator is reading above its centre-line with positive crossover above its signal line. Momentum oscillator RSI (14) is reading near 60 levels which indicates that positive momentum will continue ahead.
Craftsman Automation: Buy | LTP: Rs 2,240 | Stop Loss: Rs 2,128 | Target: Rs 2,440 | Return: 9 percent
Craftsman has given a spectacular rally from the low of Rs 1,648 on June 21, 2021, to an all-time high of Rs 2,173 on July 12, 2021, and after that rally, the prices went in a sideways consolidation for more than two months and traded in a range between Rs 1,800 and Rs 2,000.
The stock formed a rectangular pattern within that two-month period and finally broke out at Rs 2,140.40 levels on September 23 and the prices registered a decisive breakout, which suggests a change in the trend from sideways to upside.
The stock is trading above its 21, 50 & 100-day exponential moving averages on a daily time frame, which is positive for the prices in the near term.
When we observe volume activity there has been above-average volume set up from the past couple of weeks on the daily chart, which indicates accumulation phrase. Momentum oscillator RSI (14) is reading above 60 levels with positive crossover on the daily scale.
ACC October Futures: Sell | LTP: Rs 2,210 | Stop Loss: Rs 2,240 | Target: Rs 2,160 | Return: (2.3) percent
The stock has witnessed a breakdown of an upward rising trend line on the daily time frame and has closed below the same. Overall, we have seen that the stock has underperformed the benchmark index and has drifted lower.
The prices on the daily chart are trading below their 21 and 50-day exponential moving averages and we have observed a distribution formation on the weekly chart. Prices have also closed below is parabolic SAR (stop and reverse) indicator on the weekly time frame.
Momentum oscillator RSI (14) has drifted from the overbought level and reading below 40 levels on the daily time frame indicates short-term bearishness in the counter.
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