By Jigar S Patel, Senior Manager - Equity Research at Anand Rathi
Individual stocks displayed strong outperformance in the week ended August 23, contributing to robust gains in broader market indices. Specifically, the Nifty Midcap 100 index surged by approximately 1.56 percent, while the Nifty Smallcap 100 index rallied by 3.5 percent.
From a technical perspective, the outlook for the Nifty 50 index remains positive, but traders should be cautious around the 24,900 – 25,100 range. This range is expected to serve as a significant resistance level due to a gap observed on the daily chart. If the Nifty index manages to close decisively above this resistance zone, it could open the door for further upside potential. However, if the resistance holds, it could create a three-point negative divergence in the RSI (Relative Strength Index) on the daily scale, which might trigger profit-taking among investors. Therefore, while we anticipate one final upward move, there is a possibility of a subsequent pullback. In the event of a decline, the support levels to watch are in the 24,500 – 24,300 zone, which could act as a safety net for the index.
The Nifty Bank index demonstrated relative strength throughout the week but faced resistance near the 51,000 mark. The index is currently approaching a potential breakout from a falling channel pattern, which would be confirmed if the index closes above 51,200. A successful breakout could propel the Nifty Bank index towards the 52,000 – 52,500 levels. Conversely, if the index drops below 50,400, it could weaken sentiment in banking stocks, leading to a broader decline in the sector.
Here are three stock pricks for short term:
Asian Granito India | CMP: Rs 93
Asian Granito has recently confirmed a significant breakout from a long-standing falling trendline, surpassing the 86 mark. This trendline breakout indicates a potential shift in the stock's price trajectory, signaling the end of a downtrend and the possible beginning of an upward move. In addition to this technical signal, the stock has formed a pattern resembling a bullish head and shoulders. This pattern is typically considered a reliable indicator of a reversal from a downtrend to an uptrend. The breakout and pattern formations are supported by increased trading volumes, suggesting strong buying interest, and the positive alignment of momentum oscillators, which reflect increasing bullish momentum.
Given these positive technical indicators, traders are advised to buy Asian Granito within the price range of Rs 90-93. To manage risk, a stop-loss should be placed at Rs 80 on a closing basis. The anticipated price target for this trade is Rs 110, expected to be reached within the next 1 to 3 months.
Strategy: Buy
Target: Rs 110
Stop-Loss: Rs 80
IDFC First Bank | CMP: Rs 74.42
After peaking around the Rs 101 mark in September 2023, IDFC First Bank underwent a significant correction, dropping 29 percent from its high. This decline brought the stock down to a support level near the 0.618 Fibonacci retracement level of its prior uptrend, which spanned from Rs 53 to Rs 101. The 0.618 retracement level is often considered a critical support level in technical analysis, indicating a potential reversal point. At this level, a bullish BAT pattern has also emerged, a harmonic pattern that typically signals a potential bullish reversal. The confluence of these technical indicators—support at the key retracement level and the formation of the bullish BAT pattern—suggests that the current price levels are favourable for buying. Therefore, it is recommended to buy the stock within the Rs 74-75 range, targeting Rs 84. To manage risk, a stop-loss should be set near Rs 70 on a daily close basis.
Strategy: Buy
Target: Rs 84
Stop-Loss: Rs 70
IndusInd Bank | CMP: Rs 1,388.55
IndusInd Bank has recently established a strong base around the support zone of Rs 1,330-1,350, a key area of interest for traders. This support zone is significant because it coincides with the completion of a bullish AB=CD pattern, a popular harmonic pattern that often signals a potential reversal or continuation of an uptrend. The bullish AB=CD pattern indicates that the stock may have reached a point of exhaustion in its downward movement, making it a favorable area for buyers to step in.
Moreover, the Relative Strength Index (RSI) on the daily chart has broken above its bearish trendline, a development that is considered bullish. The RSI is a momentum indicator, and its breakout from a downward trendline suggests a shift in momentum from bearish to bullish, increasing the likelihood of upward price movement. Given these technical factors, a long position is advised within the Rs 1,370-1,390 price range, targeting an upside of Rs 1,470. To manage risk, a stop-loss should be set near Rs 1,335 on a daily closing basis.
Strategy: Buy
Target: Rs 1,470
Stop-Loss: Rs 1,335
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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