In line with the correction in global markets on account of a surge in the dollar index, bond yields and crude prices, the benchmark Nifty index too showed some weakness, making a lower-top-lower-bottom formation in the last four trading sessions and correcting almost 700 points after forming a peak at the 22,775 levels.
After the formation of a shooting star candlestick pattern on weekly charts in the previous week and making negative divergence visible in the RSI (relative strength index), the index has seen acceleration in profit-booking and has breached its short-moving averages of 10-day EMA and 20-day EMA (exponential moving average) on the daily timeframe.
Going forward, we expect the index to continue displaying weakness and slide into a period of consolidation with negative bias. Hence, we advise investors to prioritise the large-cap stocks and quality mid-cap stocks for the coming few weeks as they offer a better risk-reward proposition along with a higher degree of safety around the elections.
Talking about levels, the 10-day as well as 20-day EMA zone of 22,380-22,430 will act as crucial resistance on the upside. Any sustainable rebound rally could be seen only on cross-over above the 22,430 levels on the Nifty Spot. Above 22,430, the Nifty may once again rally up to the 22,750-22,800 levels. On the downside, immediate support zones are placed at 21,950, followed by the 21,750-21,700 zone.
Here are three buy calls for short term:
Amara Raja Energy & Mobility: Buy | LTP: Rs 968 | Stop-Loss: Rs 900 | Target: Rs 1,070/1,100 | Return: 14 percent
On Tuesday, the stock of Amara Raja Energy & Mobility has given major long-term downward sloping trendline breakout. This breakout was accompanied by a noteworthy surge in trading volume, reaching nearly 13 times the 50-day average volume. Tuesday’s total volume of 113.24 lakh far exceeded the last 50-day average volume of 8.85 lakh. The stock showed a sizeable bullish candle on the breakout day, reinforcing the strength of this upward movement.
The stock is consistently trading above its 21, 50 and 100-day EMA on daily as well as weekly timeframe underscoring robust bullish momentum. Key technical indicators, including the relative strength index (RSI), are showing optimistic readings above 65 across daily, weekly, and monthly time frames, indicating favourable momentum conditions. Moreover, the other volume-based indicators like OBV (on-balance volume) and Money Flow Index are also very strong.
The trend strength is extremely high. The average directional index (ADX), which shows trend strength, is as high as 27.45 on a daily chart and 26.96 on a weekly chart. Usually, the above-25 level is considered a strong trend. In both time frames, the stock is meeting the criteria.
In a nutshell, the stock has registered an eight-year-strong breakout along with volume confirmation. Hence, we recommend to accumulate the stock in the zone of Rs 970-940 level with the stop loss of Rs 900. On the upside, it is likely to test the level of Rs 1,070, followed by Rs 1,100 in short-term.
CDSL: Buy | LTP: Rs 1,976 | Stop-Loss: Rs 1,890 | Target: Rs 2,120/2,170 | Return: 10 percent
Post testing a low of Rs 880 in March 2023, Central Depository Services (CDSL) started marking the sequence of higher tops and higher bottoms on monthly charts uptill November 2023 and within just 45 weeks, it soared by over 130 percent. However, a notable event occurred in the first week of February when a High Wave-like candle formed and thereafter it slid into the period of consolidation with subdued trading volume during this consolidation period, suggesting that it is just a routine correction following a substantial upward surge.
This correction halted in the zone of Rs 1,640-1,620 levels, which is the confluence of 34-week EMA and 38.2 per cent Fibonacci retracement level of its prior upward rally (Rs 880-2,067). This support zone served as a springboard for a notable rebound in the stock's price, which was further validated by a notable increase in trading volume over the period of past 3 weeks.
The stock is consistently sustaining above its 21, 50 & 100-day EMA on daily as well as weekly timeframe underscoring robust bullish momentum.
The momentum indicators and oscillators are also supporting the overall bullish chart structure. The daily, weekly and monthly RSI is in bullish territory with strong reading above 60 levels. The trend strength indicator, ADX is quoting at 21.82 level and it is in rising trajectory. Further, the directional indicators continue in buy mode as +DI continues above –DI.
Hence, we recommend to accumulate the stocks in the zone of Rs 1,975-1,950 level with the stop-loss of Rs 1,890. On the upside, it is likely to test the level of Rs 2,120, followed by Rs 2,170 in short-term.
Eicher Motors: Buy | LTP: Rs 4,356 | Stop-Loss: Rs 4,160 | Target: Rs 4,840 | Return: 11 percent
Nifty Auto has been exhibiting notable strength compared to the broader market indices in recent weeks. The ratio chart of Nifty Auto to Nifty has surged to a fresh 52-week high on Tuesday and is currently at its highest level in 69 months. Among the constituents of Nifty Auto, 60 percent stocks were trading above their 20-day EMA. While, 73 per cent stocks were trading above their 50-day EMA level, highlighting the robust internal strength of the index.
The stock of Eicher Motor is strongly outperforming the Nifty Auto index and it has recently given Stage-2 Cup pattern breakout on weekly scale. The depth of the cup formation is 15 percent and length is 18-weeks. This breakout is supported by significant trading volume, indicating strong buying interest from market participants. Moreover, the breakout is reinforced by the formation of a substantial bullish candle on the breakout week, highlighting the conviction behind the upward movement. Furthermore, the continued buying activity in the current week suggests that the breakout has potential sustainability.
As the stock is trading at all-time high level, all the moving averages and momentum-based indicators are suggesting strong bullish momentum in stock. The weekly and daily RSI is in bullish zone as per RSI range shift rules. The daily and weekly MACD (moving average convergence divergence) stays bullish as it is quoting above its zero line and signal line. The daily MACD histogram is suggesting pickup in upside momentum.
These technical factors are aligned in favor of bulls. Hence, we recommend to accumulate the stock in the zone of Rs 4,360-4,320 level with the stop loss of Rs 4,160 level. As per the measure rule of Cup pattern, the upside target is placed at Rs 4,840 in short-term.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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