Momentum indicators are trading in a bullish zone and RSI is bouncing back from important support levels indicating that dips are likely to be bought into, until prices are trading above 11,200 level.
Bullish exuberance continued on the Street as Nifty showed a fine resilience to close above 11,350 mark. The gain of approximately 200 points has been registered on a weekly basis and the index has closed at 11,371.60.
Small body candles or Spinning Top in the daily time frame indicate that bulls are tired and Nifty is likely to trade in a sideways zone with positive bias until the recent high of 11,460.35 trades on the higher side. The rising trendline originated by joining the lows of March 24, 2020 and May 18 is likely to provide support to the prices on every dip.
The 20-day moving average (11,221) also exists near trendline support suggests that the index could trade in the range of 11,221 to 11,465 in the forthcoming week. The 20 DMA acts as an equilibrium for demand and supply and any exaggerated or one sided move generally settle near it in the short term in order to maintain demand and supply.
Momentum indicators are trading in a bullish zone and RSI is bouncing back from important support levels indicating that dips are likely to be bought into, until prices are trading above 11,200 level. Here, we have taken a buffer of 21 points for the above-mentioned support level.
Any move above 11,465 could further accelerate the rally towards 11,529 and 11,687 which is 38.2 percent and 100 percent projection level respectively based on previous week trading range. On the other hand, 38.2 percent projected level on the downside exists at 11,250 which is likely to act as support in a forthcoming trading week. To put things into perspective, the overall structure reflecting that bulls are tired but not ready to give up and bullish bias needs to be maintained until the Nifty is trading above the support level of 11,200. The deeper cuts can be expected only if the support level breaks on the lower side on a closing basis.
Three stocks are likely to outperform the market and could offer 9.5-12 percent in the short term.
Apollo Tyres: Buy | CMP: Rs 131.25 | Target: Rs 147 | Stop loss: Rs 125 | Return: 12 percent
The stock has gone through a mild correction after a recent rally and bounced back after testing its 10-day exponential moving average. The correction has taken a shape of bullish flag formation and the breakout of a formation is witnessed in Friday's trading session. RSI is bouncing back from important support levels on the daily chart and the stock is trading above all its major short term and medium-term moving averages. Positive crossover in stochastic in a bullish zone indicates that fresh leg of up move might not be ruled out in the coming days. Stock is looking poised for a fresh upmove and traders can initiate long positions at current market price (CMP) and on any dip till Rs 128 for short term gain.
BPCL: Buy | CMP: Rs 410.10 | Target: Rs 454 | Stop loss: Rs 388 | Return: 10 percent
Trend reversal buy has been witnessed in the stock as the prices have started trading with a higher top and higher bottom formation. The stock has broken out of a trading range on July 17, 2020 with a bullish 'Marubozu' candle above Rs 400 level. The same level has recently acted as support where prices have also formed a 'Doji' pattern at a 50-day moving average followed by a green candle. The pattern suggests that mild correction in stock is now over and the bulls are likely to take the rally forward. The expanded medium term moving averages ribbon is likely to provide cushion to the prices on every dip. Traders can initiate buying positions at CMP and pyramid the trade by adding more once the stock starts trading above Rs 424 with the short term perspective.
Max Financial Services: Buy | CMP: Rs 557.35 | Target: Rs 610 | Stop loss: Rs 516 | Return: 9.5 percent
Short term correction seems to be over in the stock and bulls are likely to take the charge again. The bullish candlestick pattern on August 18, 2020 near 50-day exponential moving average suggests that bulls have entered in a counter at lower levels. Further, the falling trend line breakout on Friday's trading session with decent volume is providing an additional signal that short term rally might not be ruled out in the coming days. The short term moving averages ribbon is developing a bullish curve after a recent correction and prices are trading above all its major short term and medium-term moving averages. Traders can initiate long positions at CMP and on any dip till Rs 540 for a short term gain.
Note: CMP resembles the closing price as on August 21, 2020.
The author is Senior Technical Analyst (Equity & Currency) at Rudra Shares & Stock Brokers Ltd. (SEBI Reg.No.INH100002524).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.