Nifty has broken down after making a Head and Shoulder reversal pattern above 11,550 and have almost reached the pattern target of 11,240. In the process Nifty has closed below its short term moving average 20-DMA placed around 11,612 and 50-DMA trading at 11,425 that shows bearish sentiment in the short term. Also, Nifty formed a long body bearish candlestick pattern, suggesting a continuation of the down move.
On the contrary, Nifty is trading above its two major simple moving averages 100-DMA and 200-DMA that are rising and placed around 11,100. Also, the occurrence of crossover formation has happened recently.
Nifty is trading in a negative note continuously from the last eight trading sessions; the majority of the momentum oscillators are in the oversold zone, the possibility of a bounce back cannot be ruled out. Moreover, the index has closed near to monthly pivot point, placed around 11,270 and 50 percent retracement of last upswing (10,600-11,860) is also around 11,235 suggesting strong support lies in the 11,235-11,270. This zone of support also gets strength from rising trend line around 11,270.
Market momentum still favours a down move but now Nifty has entered into the strong technical support zone. Global volatility and elections-related uncertainties are key events to watch out for.
Any decisive move below the support zone will push prices lower towards the line of parity placed around 11,111 and further to 11,000 where maximum open interest in Put exists.
Here are the top stock trading ideas that can give good returns:
Welspun Corp: Buy Around: Rs 138 |Target: Rs 165| Stop loss: Rs 123| Upside: 20 percent
Recently, the stock gave a falling channel break out on upside that suggests trend reversal on the daily chart. From last few days, it has been trading above its 50 and 100-DMA along with bullish crossover that indicates strength. Formation of bullish belt hold while giving breakout indicates stock can upsurge further higher. Buy Welcorp around Rs 138 with a stop loss of Rs 123 for the target of Rs 165.
Canara Bank: Buy Around: Rs 260 |Target: Rs 290| Stop loss: Rs 245| Upside: 12 percent
Scrip has given a double bottom breakout on the upside. Presently, scrip is trading above all its important moving averages which implying further upside momentum in the coming days. Daily RSI is also looking firm along with other indicators and oscillators that have become supportive for the price pattern. Buy Canara Bank around Rs 260 with a stop loss at Rs 245 for the target of Rs 290.
Ajanta Pharma: Buy around: Rs 1,045 |Target: Rs 1,150| Stop loss: Rs 990| Upside: 10 percent
Scrip took a sharp rebound on the upside after hitting low of Rs 970 and started consolidating in the formation of Pole & Flag pattern on the daily chart. But the breakout of this continuous pattern is expected above Rs 1,080 from where it will gain momentum for proceeding towards northward side.
Currently, it formed a strong base near its 20-DMA that comes near Rs 1,035. RSI and MACD are looking firm which indicates support at current levels. One can go long in Ajanta Pharma around Rs 1,045 for the target of Rs 1,150 with a stop loss of Rs 990.
State Bank of India: Buy around: Rs 303 |Target: Rs 330 | Stop loss: Rs 288| Upside: 9 percent
The stock appears to have formed a short term bottom near the lower base of the falling channel line from where it attracts buying interest around Rs 300-303. Buying momentum will accelerate above Rs 314 where pattern breakout is expected and it can attempt to retest its interim top in coming sessions.
Declining histogram of MACD also suggests upside momentum. Positional trader can create fresh long position around Rs 301-303 with a stop below Rs 288 on closing basis for an initial target of Rs 330.
Mahindra & Mahindra: Buy around: Rs 623 |Target: Rs 658| Stop loss: Rs 605| Upside: 6 percent
The stock bottomed out near Rs 616 in anticipation of double bottom pattern formation on the daily chart which suggests buying momentum is around the corner. Line of parity near the support line on the daily chart indicates upside movement in the coming sessions.
Positive crossover in MACD on the hourly chart is also creating positive rhythm in the scrip. Furthermore, positive divergence in RSI on weekly chart adds the conviction of buying the scrip around Rs 623 for the target of Rs 658 with a stop loss of Rs 605.
The author is Head - Technical & Derivative Research at Narnolia Financial Advisors Ltd.Disclaimer
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