For regaining strength, Nifty has to hold above 11,900-11,850 zones from where it can show pullback rally towards 12,150 and 12,300 levels on upside.
Despite opening on a positive note, market the wiped out its gain and entered into the negative territory and closed lower in the eventful week. Although the index has formed long body bearish belt hold candlestick pattern on the weekly timeframe, the overall structure looks promising which is indicated by the strong support zone on lower levels whereas not closing below previous week's low also indicates markets are still in bulls grip and it can continue with bullish bias further.
In last some days, RSI had given a breakout by trading above 50 levels from below and made a high of 75 then after it is trading lower or retracing towards the centerline placed at 50 levels, this behaviour is called as 'RSI PBB' setup.
RSI PBB is pull back buy setup which indicates, once RSI turns its tail upside after taking support from zone of 45-55 levels, the target is previous swing high of RSI which was 75 or previous swing high of prices. Currently, the index is going through this setup and we expect higher price movement towards previous high of 12,200 levels in coming days.
Nevertheless Nifty is trading higher above all popular moving averages (50/100/200) DMA indicating the strong bullish bias to continue further. At the same time, the recent formation of Golden Crossover of 50*200 DMA indicates strong price action in favour of bulls in mid-term.
For regaining strength, Nifty has to hold above 11,900-11,850 zones from where it can show pullback rally towards 12,150 and 12,300 levels on the upside. However, a break below 11,840 levels can push the index down towards 11,700 levels.
The banking index witnessed profit booking at higher levels and corrected from 32,000 levels, closing below previous life high (31,783) indicating correction sell leg is in progress. As long as the banking index sustains above 31,000, it can extend higher towards 33,000 levels provided by the Fibonacci extension. Moreover, the trading range for the banking index will be 30,800-33,000 for the coming week.
Here is the list of three stocks which could give double-digit returns in the short term:
JSW Steel: Buy Around: Rs 250 | Target: Rs 290 | Stop Loss: Rs 225 | Upside: 16 percent
Stock is in uptrend forming higher tops and higher bottom on the daily as well as on weekly charts. The stock has formed a double bottom and has given a breakout. As of now, it is testing its neckline from where a bounce back is expected on the upside.
Sustainability of RSI above 9 EMA and bullish crossover in MACD suggest strength, looking at all these technical factors, we suggest buying in the scrip around Rs 250 with stop loss below Rs 225 on a closing basis for the target of Rs 290 levels.
Tata Steel: Buy Around: Rs 395 | Target: Rs 455 | Stop Loss: Rs 360 | Upside: 15 percent
The scrip is undergoing consolidation in the longer time frame and is on the verge of resuming its prior trend. The crucial resistance of the 50 SMA has been recently taken off which indicated short term momentum to the uptrend. The momentum indicator MACD has crossed the signal line indicating a start of a trend.
The RSI too is above its key 50 mark indicating positive momentum on its side. We recommend buying Tata Steel around Rs 395 with a stop loss of Rs 360 for a target of Rs 455.
State Bank of India: Buy Around: Rs 315 | Target: Rs 360 | Stop Loss: Rs 289 | Upside: 14 percent
The daily chart of the stock reveals that demand is increasing and supply is diminishing as the stock is taking support from the line of parity showing possibility of a rebound from its lower levels. Positive divergence in RSI and bullish crossover in MACD in the lower time frame of the chart is showing strength.
With the chart looking attractive and decent volume participation witnessed, we recommend buying around Rs 315 for an upside target of Rs 360, keeping a stop loss of Rs 289.
(The author is Head of Technical Research at Narnolia Financial Advisors Ltd.)
Disclosure: Narnolia Financial Advisors/Analyst (s) does/do not have any holding in the stocks discussed but these stocks may have been recommended to clients in the past. Clients of Narnolia Financial Advisors Ltd. may be holding aforesaid stocks. The stocks recommended are based on our analysis which is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.Disclaimer: The views and investment tips expressed by investment experts 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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.