The Nifty50 continued its strong momentum in the previous week, giving its highest weekly closing since January 2020. The index has formed a green candle and flat bottom green Heikin-Ashi candlestick pattern, which denotes a strong bullish movement in progress. The Nifty has given bullish crossover as 100 DMA crossed 200 DMA from below, signaling that the strong bullish momentum will continue in the mid term, which can even push the index towards the 12,150-mark or higher.
At the same time, the benchmark index has also formed a moving average crossover pattern of 5*20 SMA on the monthly timeframe and whenever this setup takes place, the Nifty trades in a new trading zone for a long term, which suggests it is a buy-on-dip market for long-term investors.
But as markets have surged almost 1,000 points in the last two weeks, the majority of the oscillators and indicators are placed in the overbought zone and a correction, as part of the cooling-off process, cannot be ruled out. Additionally, Fibonacci extension of 1.618 taken from 11,618 pivot point and 10,790 low comes near 12,150, which is also signalling a resistance zone between 12,100 and 12,150 marks.
The crucial supports during any correction would be provided by 20-DMA placed around 11,800-mark and 5-DMA standing around 11,730.
Last week, the Bank Nifty gave a stellar rally and managed to close above its 200-DMA, which indicates that the bullish movement will continue. At the same time, it has given Bollinger Band breakout by closing above the upper band, suggesting the possibility of strong price action in the coming sessions. The trading range for the banking index in the near term is 22,500 on the lower side and 25,000 on the higher side.
Here are three trading ideas that can return 11-23 percent in the short term:
Mahindra & Mahindra Financial Services: Buy Around Rs 130 | Target: Rs 160 | Stop Loss: Rs 110 | Upside: 23 percent
The scrip spurted from a low of Rs 112 and formed a Cup & Handle pattern, it showed pullback on upside marked the high of Rs 136 mark. It is waiting for a breakout on the upside so that it can accelerate buying momentum. The emerging line of polarity on the daily time frame of the chart is suggesting a bullish momentum in the scrip. Indicators and oscillators are also showing a conducive scenario in the coming sessions. So based on the mentioned technical structure, one can go long in the scrip around Rs 130 for the target of Rs 160 and Rs 170 with a stoploss of Rs 110.
Hindustan Petroleum Corporation: Buy around Rs 175 | Target: Rs 195 | Stop Loss: Rs 162 | Upside: 12 percent
The short-term correction seems to be over in the stock and the bulls are likely to take charge again. The formation of Bullish Engulfing price pattern on the daily timeframe suggests that the bulls have entered the counter at lower levels. Further, bullish divergence in RSI on the daily chart is providing good support, which gives an additional signal that the short-term rally might not be ruled out in the coming days. Traders can initiate long positions around Rs 175 with a stoploss of Rs 162 and the target of Rs 195.
RBL Bank: Buy around Rs 178 | Target: Rs 198 | Stop Loss: Rs 166 | Upside: 11 percent
On the daily chart, the stock is expected to give inverted Head & Shoulder breakout and looks positively poised to trade higher. Also on the daily chart, the scrip took support from the line of parity and bounced back with marginally higher volumes, which suggests next upswing in the prices. The key technical indicators in the near-term time frame are in buy mode. The stock has the potential to continue the current upmove and will test higher levels. Hence, looking at the current structure we recommend buying in the stock around Rs 178 with a stoploss of Rs 166 on the closing basis for the target of Rs 198 levels.
(Shabbir Kayyumi is the Head of Technical Research at Narnolia Financial Advisors 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.