'Initiate fresh longs in Nifty in 11,930-11,990 range for a target of 12,246'

Vinay Rajani

Nifty50 fell for the third consecutive session to close at 12,050. Last week, Nifty ended forming the “Doji” candlestick pattern on the weekly charts, which indicates the indecision between bulls and bears.

The previous bottom on the daily charts is placed at 11,990 and 38.2% Fibonacci retracement of the rally seen from 11,614 (3rd Feb 2020 low) to 12,246 (14th Feb 2020) is placed at 12,005. Therefore, the significance of 12,000 odd levels as support is high.

The Advance-Decline ratio has been negative for the last seven straight sessions. The Nifty Midcap and Smallcap indices have been underperforming and have closing negative in five out of the last six sessions.

For the week ended February 7, 2020, the Nifty formed a bullish “Piercing line” candlestick pattern on the weekly charts and that pattern is still carrying its bullish implications.

The Nifty50 has not even retraced 38.2% of the entire rally seen from 11,614 to 12,245. 38.2% and 50% Fibonacci retracement of this swing are seen at 12,005 and 11,930, respectively.

Usually, the trend is considered to be intact unless underlying retraces more than 50 percent of the primary trend. So unless Nifty closes below 11930, which happens to be 50% retracement, the primary trend of the benchmark would be considered bullish.

As far as sectoral indices are concerned, defensive sectors like I.T and Pharma Index have been performing relatively better than the high beta sectors like Auto, Financials, and Metals.

To conclude, there are a series of supports lies between 11990 and 11930. This range should be utilized to initiate fresh long positions in the Nifty by keeping a stop loss at 11900 on a closing basis. A level above 12,246 resistance would extend the gains towards 12,430 and 12,600 in Nifty.

Here is a list of top three stocks which could give 7-12% return in the next 3-4 weeks:

Crompton Consumer: Buy| LTP: Rs 291| Target: Rs 326| Stop-Loss: Rs 272| Upside 12%

The stock formed a strong base around 195 and reversed north three times since July 2017. For the month ended January 2020, the stock broke out from the rectangle pattern on the monthly charts.

Volumes have been rising for the previous four months. By surpassing 276 resistance, the stock broke out from 5 month’s price consolidation in January 2020.

The stock recorded a downward sloping trend line breakout on the daily chart. Volumes have been rising for the last 3 sessions.

The primary trend of the stock is bullish with higher tops and higher bottoms on the weekly chart. The stock is placed above its 20, 50, 100 and 200-DMA, indicating bullish trend on all time-frames.

(The author is Technical & Derivatives Analyst at HDFC Securities)

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