By Jigar S Patel, Senior Manager - Equity Research at Anand Rathi
It was a week (ended September 13) of resurgence for the bulls as the domestic markets rallied, pushing the Nifty 50 to new highs. Early in the week, the index found solid support near the 24,800 mark. In a dramatic weekly expiry session, the Nifty surged by approximately 500 points in a single day, reaching new heights above 25,400. Over the week, the index gained more than 2 percent, driven by positive global market cues. Initially, it was anticipated that the Nifty 50 might decline towards the 24,600 level, but it instead found a strong base at 24,800, which aligned with the 38.2 percent Fibonacci retracement level from its previous rally between 23,900 and 25,300.
While the index is currently trading at new highs, there are signs of caution. The daily RSI (Relative Strength Index) is showing negative divergence, and the index is facing resistance near a rising trendline. If the Nifty breaks above 25,450, it could potentially climb to 25,600 or higher, but traders are advised to book profits as the recent surge appears to be a short-term pullback in a broader bear market, unlikely to sustain in the long term. On the downside, 25,000 serves as a crucial support level, and any break below this on a closing basis could create panic in the market. Investors are advised to remain cautious and focus on stock-specific strategies, avoiding aggressive positions.
In comparison, the Nifty Bank index outperformed, gaining over 2.5 percent during the week. It found initial support at 50,000 and closed near 52,000. The index is also facing resistance near a rising trendline, but a break above 52,000 could see it advancing towards 53,000. On the downside, several intermediate support levels exist, with the most significant being at 50,000, making it a crucial level to watch for the next week.
Here are three buy calls for short term:
Som Distilleries and Breweries | CMP: Rs 120
Som Distilleries and Breweries reached a peak near Rs 149 in May 2024, but since then, it has experienced a significant decline, losing 29 percent in price. This sharp decline brought the stock down to a critical support level, forming a triple bottom pattern in the range of Rs 105-108. The triple bottom pattern, occurring at a previous demand zone, is often considered a bullish signal, suggesting that the stock has found strong support at these levels and may be poised for a reversal.
On August 30, the stock saw a surge in trading volume, indicating renewed investor interest. The price action in this session was strong enough to give bull cross on daily MACD (Moving Average Convergence Divergence) scale signaling a potential shift from a downtrend to an uptrend.
These technical developments made the stock an attractive buy candidate at current levels. Based on this analysis, we recommend going long in the price range of Rs 118-120, targeting an upside of Rs 132. To manage risk, a stop-loss should be placed at Rs 112 on a daily closing basis, ensuring protection against any further downside.
Patel Engineering | CMP: Rs 60
After reaching a peak around Rs 70 mark in July 2024, the stock experienced a notable correction, losing 27 percent from its recent high. This sharp pullback brought the stock down to a critical support level, located within the demand zone of Rs 50-53, a level that previously acted as a strong support during its prior uptrend.
At this crucial support level, a bullish BAT pattern has emerged—a Harmonic pattern known for signaling potential bullish reversals. The bullish BAT pattern is typically formed when the price action retraces to specific Fibonacci levels, indicating that the stock is poised for a reversal from its recent decline. The emergence of this pattern, combined with the stock finding support at a key demand zone, creates a strong confluence of technical indicators that point towards a potential upward move.
Given these favourable technical signals, the current price levels are considered attractive for buying. Therefore, it is recommended to buy the stock within the Rs 58-60 range, with an upside target of Rs 68. To manage risk and protect against further downside, a stop-loss should be placed near Rs 55 on a daily closing basis.
Indian Railway Catering & Tourism Corporation (IRCTC) | CMP: Rs 937
Recently, IRCTC's stock price has been consolidating around its 200-day Exponential Moving Average (DEMA), which is often seen as a critical support level. This consolidation suggests that the stock is forming a solid base, indicating a potential shift in trend. During the current trading session, the stock attempted to break out of its consolidation range but was unable to sustain itself above the breakout level, signalling some resistance. From a technical indicator perspective, the daily RSI has bounced back from the 40 level, which coincides with a break in the bearish trendline. This reversal in the RSI suggests that bullish momentum may be building in the coming sessions. However, to confirm this upward move, it is recommended to enter the stock only after a decisive close above Rs 953, targeting Rs 1,050, with a stop-loss set at Rs 895 on a daily closing basis to manage risk.
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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