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Last Updated : Aug 09, 2020 03:11 PM IST | Source: Moneycontrol.com

Momentum oscillator indicates Nifty could consolidate; three stocks for short term

The crucial support zone for Nifty is standing around 10,850 and resistance zone is placed around 11,350 mark and either side movement will decide the future price action.

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Shabbir Kayyumi

Nifty started on a negative note last week but it bounced back sharply from the strong support provided by the line of parity and 200-DMA standing around 10,880 mark and traded with positive bias for the rest of the week. The index is trading above 20-DMA, 50-DMA and 100-DMA imply positive bias to continue further. Interestingly, ADX parameter is sliding lower for last 2 weeks; however, +DI is still trading above (–DI) indicates strength is still intact which can push prices higher towards unfilled gap standing around 11,620 marks.

Recently, Nifty registered a high of 11,341 levels then after it is consolidating in a broader range of 400 points. Crucial Fibonacci resistance of 78.6 percent is also standing around 11,377 mark which are derived by putting retracement on the previous high of 12,430 and low of 7,511. This also suggests crucial levels of 11,377 needs to be surpassed for the higher side movement towards 11,620.

Close

Nevertheless, majority of the momentum oscillators are cooling off and getting ready for one more upside whereas confirmation will come on a close above 11,350 mark only, till then the possibility of sideways movement cannot be ruled out. However, the crucial support zone is standing around 10,850 and resistance zone is placed around 11,350 mark and either side movement will decide the future price action.

Bank Nifty traded in a tight range and gave a subdued movement of merely 1,000 points during the last week. It is having a line of parity support near 21,000 and one should be cautious on a decisive move below these levels.

Here are three stocks that could return 8-16 percent in short term:

L&T Finance Holdings - Buy Around Rs 62| - Target: Rs 72| - Stop Loss: Rs 57 -| Upside: 16 percent

Bargain hunting is seen at lower levels in the scrip from where it formed a strong base near Rs 58-60 zone. Currently, it formed a double bottom on the daily chart and the momentum oscillator RSI also turned above 50 mark which suggests a reversal is round the corner. Other indicators and oscillators are also lending support to the price action. Trader can take an entry from the level of Rs 62 for the target of Rs 72 while keeping stop loss of Rs 58.

Power Finance Corporation: Buy Around Rs 83 - Target: Rs 91 - Stop Loss: Rs 77 |- Upside: 9.5 percent

The stock price has broken out from the symmetrical triangle on the daily charts. It has closed above the consolidation range of the last few weeks with the higher volumes and is placed above all important moving average parameters. RSI is also mirroring the price pattern which is hinting bullish set up on daily charts. The contraction in DMI is also implying an upside move. Therefore, we recommend buying the stock at Rs 83 with a target price of Rs 91 and a stop loss of Rs 77.

Dabur India: Buy Around Rs 505 - Target: Rs 545 - Stop Loss: Rs 480 -| Upside: 8 percent

The stock is with a strong uptrend and rallied from Rs 462 to Rs 518 without any meaningful correction in 3 months. Since the last few days, the stock has been going through time correction but bounces back from the line of parity which stands near Rs 500 mark. On a shorter time frame of the chart, it gave falling channel breakout which implies that the correction has completed. Hence we advise for buying the stock at current levels of Rs 505 keeping a stop loss at Rs 480 for the target price of Rs 545.

The author is Head of Technical Research at Narnolia Financial Advisors Ltd.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Aug 9, 2020 03:11 pm
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