By Jigar S Patel, Senior Manager - Equity Research at Anand Rathi
The Nifty 50 started the week on a positive note, reaching a high of around 24,270 on Monday. However, sentiment was dampened by the release of the Hindenburg report targeting SEBI and escalating geopolitical tensions between Israel and Iran, which caused the index to drop to approximately 24,100. Despite this setback, the bulls staged a strong recovery on Friday, propelling the Nifty 50 up by around 400 points and allowing it to close comfortably above the 24,500 mark for the week ended August 16.
The Nifty 50’s ability to close above 24,500 confirms a solid support zone between 24,100 and 23,900. From a technical perspective, the index now appears poised to test the 24,700 and 25,000 levels in the coming week, as these are key resistance zones that need to be breached. Conversely, a close below 24,100 could signal a bearish Flag breakdown, potentially leading to further declines. Traders may want to adopt a "buy on dips" strategy as long as the 24,100 level holds.
Similarly, the Nifty Bank index also rebounded during the last trading session of the week, reclaiming the 50,500 mark. Looking ahead, a close above 50,600 would confirm a breakout from a falling wedge pattern, with an upside target of around 52,000. On the downside, a double-bottom formation near 49,600 serves as crucial support. A breach of this level could negate the bullish outlook and potentially lead to increased market volatility.
Here are three buy calls for the short term:
Nestle India | CMP: Rs 2,525.5
Nestle India recently reached a high of Rs 2,645 on July 19, 2024, but since then, it has undergone a correction, shedding about 7% gains. Currently, the stock is beginning to show signs of stabilizing as it approaches a critical support level, near its previous breakout range. This level is significant because such breakout ranges often serve as strong support zones, acting as a price floor where buyers might step in. This support area is further reinforced by two key technical indicators: the 200-day Exponential Moving Average (DEMA) and the 50 percent Fibonacci retracement level from the stock's prior uptrend, which began at Rs 2,317 and peaked at Rs 2,645.
The convergence of these indicators at the current price level highlights the importance of this support zone and suggests it may hold. Moreover, technical indicators are starting to turn favourable. Specifically, the Relative Strength Index (RSI) on the hourly chart has formed a bullish divergence, a pattern that often signals a potential reversal or upward momentum in price. Considering these technical factors, it is advisable to initiate a long position in Nestle India within the price range of Rs 2,500-2,530.
Strategy: Buy
Target: Rs 2,760
Stop-Loss at Rs 2,395
Macrotech Developers | CMP: Rs 1,296
After reaching a high near Rs 1,595, Lodha has undergone a substantial decline, shedding 28 percent gains. This significant correction has brought the stock down to a critical technical level, where it has found support at the 200-day DEMA. The 200 DEMA is a widely recognized indicator used by traders to identify long-term support levels, and in this case, it appears to be playing a crucial role in stabilizing the stock. Adding to the significance of this support level, a bullish BAT pattern has emerged right at the 200 DEMA, further strengthening the case for a potential reversal in the stock's downtrend.
The bullish BAT pattern, a harmonic trading pattern known for its reliability in signaling potential price reversals, suggests that the stock may be poised for a recovery. Given these technical signals, it is recommended to consider taking a long position in Lodha within the price range of Rs 1,275-1,300. The potential upside target is set at Rs 1,400, providing a favourable risk-reward ratio. To manage risk, a stop-loss should be placed at Rs 1,232 on a daily closing basis, ensuring that any further downside movement is contained.
Strategy: Buy
Target: Rs 1,400
Stop-Loss: Rs 1,232
Bajaj Finance | CMP: Rs 6,590.9
Bajaj Finance reached a peak of Rs 7,429 on June 18, 2024, but since then, it has undergone a notable decline, losing about 11 percent of its value. This drop has brought the stock down to a critical support level around Rs 6,500, a historically significant zone where the stock has previously found stability. At this juncture, the RSI on the hourly chart is showing a bullish divergence near this support level, a technical signal that often indicates a potential reversal in price trends. This suggests that the current price levels might offer a favorable buying opportunity.
Adding further weight to this view, a bullish BAT pattern has emerged right at Rs 6,500-6,600 support zone. The bullish BAT pattern, a harmonic trading pattern known for predicting price reversals, reinforces the likelihood of a turnaround in the stock's recent downtrend. Given these technical indicators, we recommend taking a long position in Bajaj Finance within the price range of Rs 6,575-6,600. The potential upside target is set at Rs 7,000, with a stop-loss at Rs 6,385 on a daily closing basis to effectively manage risk and protect against further downside.
Strategy: Buy
Target: Rs 7,000
Stop-Loss: Rs 6,385
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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