By Jigar S Patel, Senior Manager - Equity Research at Anand Rathi
The Nifty 50 index plunged by more than 1,100 points in just four trading sessions, falling back to the 25,000 mark in the week ended October 4. We have consistently maintained a cautious stance on the markets, citing the highly overbought long/short ratio of FIIs in index futures. In line with our outlook, the ratio has now decreased from 80 percent to 58 percent, with the Nifty 50 correcting sharply.
In the short term, we anticipate a bounce in the markets, as Nifty has retraced about 88.6 percent of its recent rally. Additionally, there is a hidden positive divergence on the daily RSI, and a normal positive divergence on the hourly scale. These factors suggest the potential for a bounce toward the 25,300–25,500 zone in the coming week. A close above 25,500 could propel the index toward 26,000 and beyond. However, we would recommend turning cautious again near the 26,000 level, as the monthly RSI (Relative Strength Index) is approaching 80. On the downside, immediate support levels are seen at 24,800–24,600.
Similarly, the Nifty Bank index plunged 4.4 percent for the week. The index has retraced almost 78.6 percent of its previous rally. On the hourly chart, we are seeing a positive RSI divergence, indicating a likely bounce in the coming sessions toward the 52,000–52,500 zone.
Here are three buy calls for short term:
JK Paper | CMP: Rs 490
Over the past month, JK Paper has been trading in a consolidation range between Rs 445 and Rs 475, and it has recently broken out of this zone, indicating potential upward movement. Notably, this consolidation phase occurred between the 100-day and 200-day Exponential Moving Averages (DEMA), which is considered a positive technical signal, as it suggests a stable base for further gains. Additionally, the RSI, which had been consolidating between 40 and 50, has also given a breakout and is now near the 62 mark, signalling increasing bullish momentum. Based on these indicators, it is recommended to take a long position in the stock within Rs 482 to Rs 492 range.
Strategy: Buy
Target: Rs 535
Stop-Loss: Rs 463
Som Distilleries and Breweries | CMP: Rs 111.8
Som Distilleries and Breweries reached a peak near Rs 149 in May 2024, but since then, it has experienced a significant decline of 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 daily scale Bullish BAT pattern has been seen near Rs 110-109 which aligns with previous demand zone thus making it lucrative. These technical developments make the stock an attractive buy candidate at current levels. Based on this analysis, we recommend going long in the price range of Rs 110-112, targeting an upside of Rs 132. To manage risk, a stop-loss should be placed at Rs 101 on a daily closing basis, ensuring protection against any further downside.
Strategy: Buy
Target: Rs 132
Stop-Loss: Rs 101
Bank of Baroda | CMP: Rs 250.6
The nearly three-month-long bearish phase in Bank of Baroda appears to be nearing its end, as a bullish pattern emerges on the daily chart. The stock has formed a triple bottom structure in Rs 230-235 zone, a strong reversal signal indicating that the downward trend may be exhausted. Currently, Bank of Baroda is trading around Rs 250 level, and the triple bottom pattern has developed near the 200-day Exponential Moving Average (DEMA), adding further appeal to the stock at this point. Additionally, the daily RSI has broken through a bearish trendline along with bull divergence, signalling a shift in momentum towards the bullish side. Given these technical indicators, it is advised to go long on Bank of Baroda in the price range of Rs 248-250.
Strategy: Buy
Target: Rs 270
Stop-Loss: Rs 239
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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