By Jigar S Patel, Senior Manager - Equity Research at Anand Rathi
During the week ended August 30, the domestic markets exhibited a solid upward momentum, with the Nifty index experiencing a positive trajectory. The index moved within a 400-point range and closed the week with a gain of 1.66 percent, settling just above the 25,200 mark—a new milestone. Notably, individual stocks outperformed, significantly boosting the broader market indices. The Nifty Midcap 100 index saw a rise of approximately 1.25 percent, while the Nifty Smallcap 100 index rallied by over 1 percent, reflecting strong investor sentiment across various segments.
From a technical perspective, the outlook for the Nifty 50 index remains optimistic. However, the 25,600 to 25,800 range is anticipated to serve as a critical resistance level due to the presence of a bearish Crab Harmonic structure on the daily chart. This pattern may induce profit-taking near these levels, suggesting that while another upward push is possible, it could be followed by a pullback. The index is expected to find support in the 25,000 to 24,800 zone.
On the other hand, the Nifty Bank index exhibited more sideways movement throughout the week, closing in the green with a weekly gain of 0.82 percent, near the 51,300 mark. The immediate resistance for this index is seen around 51,500, and a close above this level on the daily chart could propel the index towards the 52,000 mark in the coming week. However, if the index falls below the 50,800 level, it could negatively impact the sentiment in banking stocks.
Here are three stock recommendations for short term:
Som Distilleries and Breweries | CMP: Rs 112.2
Som Distilleries reached a peak of approximately Rs 149 in May 2024. Since then, the stock has experienced a significant decline, losing about 29 percent in price. This sharp drop brought the stock down to a critical support level, forming a triple bottom pattern within the range of Rs 105-108. The triple bottom pattern, occurring at a previous demand zone, is often considered a bullish signal, suggesting that the stock has found strong support at these levels and may be poised for a reversal.
In the most recent trading session, the stock saw a surge in trading volume, indicating renewed investor interest. The price action in this session was strong enough to break through a 3-4 month-long bearish trendline, signaling a potential shift from a downtrend to an uptrend. Additionally, a similar trendline violation has been observed in the RSI on the daily chart, further confirming the bullish momentum. These technical developments make the stock an attractive buy candidate at current levels. Based on this analysis, we recommend going long in the price range of Rs 110-114, targeting Rs 128. To manage risk, a stop-loss should be placed at Rs 104 on a daily closing basis, ensuring protection against any further downside.
Strategy: Buy
Target: Rs 128
Stop-Loss: Rs 104
Hikal | CMP: Rs 329.3
Between March 2023 and June 2024, Hikal was in a consolidation phase, trading within a relatively narrow range of Rs 260 to Rs 320. This prolonged consolidation period suggests that the stock was in a phase of accumulation, where neither buyers nor sellers had the upper hand. However, the stock eventually broke out of this range, supported by significant trading volume, which is often a strong indicator of a shift in market sentiment towards bullishness.
Following this breakout, Hikal rallied by nearly Rs 40, underscoring the strength of the breakout. Despite this rally, the recent correction in the stock price presents a renewed buying opportunity.
From a technical perspective, the weekly Ichimoku base line is now acting as a crucial support level, aligning closely with the breakout range. This confluence of support levels suggests that the stock is well-positioned for further upside, making it a compelling buy. Given these technical indicators, it is advisable to buy Hikal within the price range of Rs 325 to Rs 335. The stock shows potential for an upside target of Rs 400, which represents a significant gain from current levels. To manage downside risk, a stop-loss should be placed at Rs 295 on a daily closing basis, ensuring that any potential losses are limited if the stock fails to hold its support levels.
Strategy: Buy
Target: Rs 400
Stop-Loss: Rs 295
Patel Engineering | CMP: Rs 57.21
After reaching a peak around the Rs 70 mark in July 2024, Patel Engineering experienced a notable correction, losing 27 percent from its recent high. This sharp pullback brought the stock down to a critical support level, located within the demand zone of Rs 50-53, a level that previously acted as a strong support during its prior uptrend.
At this crucial support level, a bullish BAT pattern has emerged—a harmonic pattern known for signaling potential bullish reversals. The bullish bat pattern is typically formed when the price action retraces to specific Fibonacci levels, indicating that the stock is poised for a reversal from its recent decline. The emergence of this pattern, combined with the stock finding support at a key demand zone, creates a strong confluence of technical indicators pointing towards a potential upward move. Given these favourable technical signals, the current price levels are considered attractive for buying. Therefore, it is recommended to buy the stock within the Rs 55-58 range, with a target of Rs 68. To manage risk and protect against further downside, a stop-loss should be placed near Rs 51 on a daily closing basis.
Strategy: Buy
Target: Rs 68
Stop-Loss: Rs 51 Disclaimer: The views and investment tips expressed by investment 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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