Bulls reclaimed the lost ground on the back of fireworks seen in the banking index and its components. Aggressive bulls also pushed the Nifty50 by more than 540 points in the week ended May 29 which was predominantly led by banking giants.
Though the bulls ruled the streets in the last three days, the question remains whether it was a trend reversal buying or just a pullback rally. Bulls have been hammered quite intensely in the last few months and it would be quite amateurish to celebrate on the back of one week of bullish movement as this market has to prove itself on several parameters in the coming days to gain traders confidence.
As of now, the recent upmove seems to be a pullback rally from the lower end of the broad range which is established between 8,900 - 9,650 and it requires a high degree of caution as we are again trading near the higher band of the range. In the last one month, Nifty has taken resistance of 50-day exponential moving average twice and now once again is approaching the same level. RSI is also trading near an important resistance zone indicating that the pace of the ongoing upmove is likely to get abated and we could see some consolidation before the next move.
The next leg of upmove can be expected only if the 9,600 level gets traded on a higher side decisively on closing basis after the mild consolidation and in such case, the bulls can extend this rally till 9,889 and 10,050. The major support is shaping up at 9,000 levels. If it breaks, it will be a major indication that pullback buy is over and the original downtrend has now begun. Until then we can expect this market to pendulum between 9,000 and 9,650.
Apart from this, an interesting technical pattern has developed in a few scripts which are likely to outperform the market and could offer decent gains in the short and medium-term.
ACC: Buy | CMP: Rs 1,268 | Target: Rs 1,380 | Stop loss: Rs 1,215 | Return: 8 percent | Period: Short term
The stock is a classic example of a bullish crossover of short term and medium term moving averages ribbon after a consolidation phase. Trend reversal buying is shaping up in the counter after a decent fall. RSI has started trading in the bullish zone for the first time after February and other momentum indicators are also trading with positive bias.
Taking a longer-term picture into consideration, some interesting formation has developed on the monthly chart. After testing the low of 2013, two consecutive green candles have been witnessed which suggests that extension of the ongoing rally can be expected in coming days. Traders can initiate long positions in the counter at CMP and on any dip till Rs 1,230 with the short term perspective.
SBI: Buy | CMP: Rs 161.30 | Target: Rs 185 | Stop loss: Rs 145 | Return: 16 percent | Period: Medium term
The stock is an expected bounce-back candidate from the highly oversold zone. Being available at a strong long term support zone, pullback buying is expected in the counter in the coming days. Bullish divergence on the weekly chart is providing an early indication that short-covering rally can be expected in coming days. Stock is trading at a decent risk-reward point and it would be prudent to initiate long positions in the counter with a medium-term perspective.
Zee Entertainment: Buy | CMP: Rs 182 | Target: Rs 200 | Stop loss: Rs 170 | Return: 9.5 percent | Period: Short term
Stock is on the verge of a breakout from the falling trend line. It has been hammered in the last few months and went sideways. Bullish moving average crossover is shaping up after six months of fall and base building exercise has also been witnessed in the last few days. RSI has started trading in a bullish zone for the first time since November 2019. The counter is looking ready for short term bounce back and traders can go long at CMP and on any dip till Rs 175 for short term gain.
The author is Senior Research Analyst at Rudra Shares and Stock Brokers.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.