A bullish trend could push the Nifty towards 11,950. Going forward, a sustained trade above 11,950 may induce a rally towards 12,100-12,250 levels
The Nifty traded in a narrow range throughout the session on Wednesday before closing flat near the high of the candle. Over the past couple of weeks, the index has been consolidating between 11,650 and 11,900 levels, indicating short-term consolidation.
On the weekly time frame, the benchmark index is trading in a higher high-higher low formation, which is a clue that the buying on dips strategy will work in the current market set up.
In the market, IT stocks ended the session as the worst performer, whereas state-run bank outperformed the benchmark index. The volatility index -- India VIX -- witnessed a fall of 4.92 percent during the day.
On the options front, 12,500 and 12,000 Calls added most open interest (OI), whereas 11,900 and 11,700 Puts were the most active.
The bias is expected to remain positive as long as the Nifty is trading above 11,750, which had earlier acted as the short-term resistance.
At the lower end of the range, 11,600 is likely to act as support for the falling Nifty. Moreover, 11,600 is supported with a runaway gap.
On the higher side, the index has a bullish trend on its side to push it towards 11,950. Going forward, a sustained trade above 11,950 may induce a rally towards 12,100-12,250 levels.
Here is a list of top three stocks which could return 7-9% in the next 3-4 weeks:
State Bank of India: Buy| LTP: Rs 366.15 | Target: Rs 400| Stop Loss: Rs 348| Upside 9%
The stock has moved above its recent consolidation pattern which suggests growing optimism among the traders. On the higher time (monthly) frame, SBI has witnessed a multi-year breakout.
The latest rally in the stock has pushed prices above its 21 & 50-EMA on the weekly chart. On the daily chart, RSI (14) is reading above 60 levels with a bullish crossover.
Traders can accumulate the stock in the range of Rs 362 - 369 for the target of Rs 400, and a stop loss below Rs 348.
Amara Raja Batteries: Buy| LTP: Rs 631.25 | Target Rs 682| Stop Loss Rs.600| Upside 8%
In the recent correction, the stock seems to have found support at the Bullish AB=CD Harmonic pattern on the daily chart and has moved up.
On the weekly chart as well, the index formed a bullish hammer which suggests the possibility of a bullish reversal. Furthermore, prices have found support at its falling trendline.
The momentum oscillator RSI (14) has rebounded from oversold zone and currently reading above 35 with positive crossover. Traders can accumulate the stock in the range of Rs 627 - 635 for the target of Rs 682, and a stop loss below Rs 600.
Tech Mahindra: Sell| LTP: Rs 701.10| Target: Rs 648| Stop Loss: Rs 730| Upside 7.5%
The stock prices have given a breakdown of the rising channel pattern which suggests increasing pessimism in the stock. The fall in price was backed by rise in volumes.
The momentum oscillator RSI (14) is in a bearish crossover and is falling which suggests a continuation of bearish momentum.
Price is again trading below its 50-EMA which suggests weakness in the ongoing trend. Traders can sell the stock in the range of Rs 697-705 for the target of Rs 648, and a stop loss above Rs 730.
(The author is Technical Analyst, Bonanza Portfolio Ltd)Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.