Stochastic divergence on a weekly time frame played a vital role in the last week's negative price action as Nifty gave a correction of almost 500 points after forming a high near 15,173. A bearish candlestick formation on the daily and weekly time frame and consecutive second week of lower closing below previous week low also creates a doubt in the current uptrend and the possibility of short-term correction cannot be ruled out.
Furthermore, monthly as well as weekly time frame stochastic oscillator’s % D parameter has given a bearish crossover to % K parameter which is setting a negative tone in terms of price momentum too. Nifty has also formed a bearish trend reversal pattern, Head and shoulders on the lower time frame and as per the formations prices can trade lower towards 14,200 mark as long as it is trading below 15,000 levels.
The Benchmark index has seen 5 DMA and 10 DMA bearish crossover formations which are supportive for the continuation of bearish price movement further whereby it can trade lower towards 14,331 to fill the bearish gap.
Recently, India VIX has also given a breakout by closing above 25.50 crucial resistance levels and it is currently trading above its 20 DMA showing higher volatility to continue ahead which is supportive for negative price action and index can trade lower towards 14,200-14,300 levels.
Bank Nifty
After opening higher in the previous week Bank Nifty traded lower and closed below the last two week's low indicating bearish bias to continue further. At the same time it has closed below its 20 DMA and the possibility of retracement towards its 50 DMA standing around 33,000 is high.
Here is the list of three stock recommendations which could return 12-27 percent:
Bharat Heavy Electricals: Buy Around Rs 47 | Target: Rs 60 | Stop Loss: Rs 42 | Upside: 27 percent
Stock witnessed inverse Head & Shoulder breakout on a weekly chart along with the triangular pattern on the daily chart indicates bullishness in the coming sessions. Inclining peaks of MACD on the daily chart suggest upside move along with +DMI has given crossover above (-DMI) which indicates strength in the counter. Daily RSI is also trading in the bullish horizon. With the chart looking attractive, we suggest buying this stock around Rs 47 for a target of Rs 60, while keeping the stop loss of Rs 42 on a closing basis.
Coal India: Buy Around Rs 152 | Target: Rs 172 | Stop Loss: Rs 140 | Upside: 13 percent
The scrip spurted from a low of Rs 110 and gave inverted head and shoulder breakout on weekly chart which is showing pullback on the upside in the upcoming sessions. The emerging line of polarity on the daily time frame of the chart is suggesting bullish momentum in the scrip. Indicators and oscillators are also showing conducive scenarios in the coming sessions. So based on the mentioned technical structure one can go long in the scrip around Rs 152 for the target of Rs 172 mark with a stop loss of Rs 140 mark.
Sun Pharmaceutical Industries: Buy Around Rs 595 | Target: Rs 670 | Stop Loss: Rs 555 | Upside: 12 percent
On the daily and weekly charts, the stock is showing a retest of the neckline of its earlier reversal formation which is broadly positive. The incremental volume activity post breakout formation indicates further bounce back from the neckline. The stock is trading well above short-term as well as medium-term averages, which indicates that an uptrend wave is likely to continue in the near-term. One can buy the stock around Rs 595 for the target of Rs 670 with a stop loss of Rs 555 mark.
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