Hadrien MendoncaIIFL
The Nifty continues to hit a record high in almost every trading session but the momentum seems to be slightly fading. On Tuesday, the index formed a ‘Hanging Man’ pattern on the daily chart. This pattern is an early indication of a possible short term reversal. However, this would need a confirmation. When would we get a confirmation is the question to answer.
The answer to this is when the Nifty breaks below the Hanging Man patterns low of 11,540. If we observe this happening, it is likely that the index will close the gap, which was formed on Monday, placed at 11,485. This will now act as a crucial support on the downside.
Apart from this, there is also a divergence seen on the relative strength index (RSI), which is another sign that the momentum may just start to fade away in the short term. Even if we may not see a price correction, the market is likely to consolidate.
On the positive side, if the Nifty chooses to ignore the Hanging Man pattern, then the next hurdle is seen around the 11,640-11,660 levels.
The Bank Nifty is moving with a lag and under-performing the Nifty as it has failed to register fresh highs like the latter. For the index to break out once again, it has to break above 28,300-28,340 levels and close above the same. This would then lead the index higher by another 500 points. Support is seen around 27,800 levels.
Here is a list of stocks that could return 8-10% in the next 1 month:
UBL: Buy| Target: Rs 1570| Stop Loss: Rs 1397| Returns 8.1%
The stock has been showing immense strength in the past five weeks and has finally broken out from a Rising Channel pattern on the daily chart.
The price outburst has been accompanied with a smart uptick in traded volumes. Apart from this, it has also broken out from a Flag pattern on the daily chart as well which further accentuates our bullish stance on the stock.
Ashok Leyland Ltd: Buy| Target: Rs 145| Stop Loss: Rs 126| Returns 10%
The stock has been showing solid momentum for the past five weeks and has finally broken out from a Symmetrical Triangle pattern on the daily chart.
Rising volumes and positive crossovers on the other momentum oscillators indicate that current momentum is likely to get extended forward. In addition, Ashok Leyland has also surpassed its long-term 200-DEMA and closed above the same.
HCL Technologies Ltd: Buy| Target: Rs 1112| Stop Loss: Rs 986| Returns 8.3%
The stock been trading in a narrow trading band for the past five weeks and has finally broken out from the consolidation phase.
The momentum has been so strong that it is not even breached below its 5-DEMA too which indicates that the momentum is very solid.
In addition, there has been a simultaneous breakout on the relative strength index as well, which, further accentuates our bullish stance on the stock.
Disclaimer: The author is a Senior Technical Analyst, IIFL. The views and investment tips expressed by investment expert 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.
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