The dilemma of the bulls and the bears was quite apparent in the week gone by, where Nifty50 kept trading in a narrow range and closed with mild weekly gains of around 40 points. Profit-booking was witnessed on every rise and intraday volatility troubled the traders throughout the week. The initial gains of the September 18 session were shaved off in the second half of the day, indicating that the bulls were being cautious at higher levels.
In the upcoming week, traders can expect sideways move to continue with the negative bias. After the formation of a Bearish Engulfing pattern on the weekly chart ended on September 4, the upmove has abated and two indecisive candles have been formed in a row.
The weekly RSI is also trading near an important resistance area, indicating that a cautious approach needs to be adopted by the bulls. The rising trendline, which has been acting as a cushion for the prices since mid-May 2020 has been violated on the downside and the same is likely to act as a resistance in the coming days. In the daily time frame, the bullish momentum is losing steam as RSI has shifted to the sideways zone from the bullish zone.
The index is likely to trade in the range of 11,385 to 11,625 in the forthcoming trading week. The figures mentioned are 38.2 percent Fibonacci projection levels based on the previous week trading range. The supply pressure at higher levels might not be ruled out and the fall can extend till 11,270 if the trading range gets violated on the lower side.
Individual stocks will keep the traders engaged by providing lucrative opportunities and we have identified three trading ideas that can give 10 to 12 percent return in the short term.
Sun TV Network: Buy | CMP: Rs 484.5 | Target: Rs 532 | Stop Loss: Rs 462 | Return: 10 percent
The initial signal of trend reversal buying can be seen in the weekly chart. The momentum indicators have started trading in the bullish zone. RSI has entered a bullish territory for the first time since January 2018. The stock has breached the falling trendline resistance, suggesting that the bulls have entered and higher levels can be seen in the coming days.
In the daily time frame, the stock has corrected after a recent rally and taken support at a 20-day simple moving average. The reversal of RSI from the significant support level and bullish candlestick pattern suggests that reversal after retracement can be expected in the counter. The prices are trading above all major short-term and medium-term moving averages and positive crossover can be seen in momentum indicators. Traders can initiate buying at the current market price (CMP) and on any dip till Rs 475 for short-term gains.
Lakshmi Machine Works: Buy | CMP: Rs 3,687.3 | Target: Rs 4,130 | Stop Loss: Rs 3,430 | Return: 12 percent
After a prolonged downtrend, the stock is showing signs of life. The short-term moving averages ribbon in the weekly time frame has developed a positive curve and prices are also trading above all medium-term moving averages.
The momentum indicators are trading in a bullish zone, indicating that the ongoing rally is likely to continue. On the daily chart, the stock has retraced mildly after a recent upmove and poised for a fresh breakout. The RSI is bouncing back from the important support level and other momentum indicators suggesting that a fresh leg of the rally can be expected in the stock in the coming days. Traders can initiate buying at CMP and pyramid their positions by adding more if Rs 3,850-level trades on the higher side.
Glenmark Pharma: Buy | CMP: Rs 508.9 | Target: Rs 560 | Stop Loss: Rs 482 | Return: 10 percent
The bullish crossover of the short and medium-term moving averages ribbon has been witnessed on the weekly chart along with a declining trendline breakout. The momentum indicators are trading in a bullish zone indicating strength in the counter.
In the daily time frame, the stock is trading above all major moving averages and RSI has again started trading in a bullish zone after a mild retracement.
The recent consolidation in the counter near its 50-day exponential moving average seems to be coming to an end and a fresh upmove can be expected in the near term, as the short-term moving averages ribbon has started trading with a positive curve. Traders can initiate buying positions with a short-term perspective.
(The author is Senior Technical Analyst (Equity & Currency) at Rudra Shares & Stock Brokers Ltd.)
Disclaimer: The views and investment tips expressed by 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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