Bears are holding the dominance and close below 11,500 would push Nifty towards the next support of 200-DMA, currently placed at 11,113.
For the last five sessions, the Nifty50 has been recovering gradually with a lake of momentum. However, the total recovery has been just 126 points from the recent low of 11,461, registered on July 9.
This recovery seems more like a pullback as Nifty has not even surpassed the 5-days EMA on a closing basis. This indicates that the index getting supply at a higher level with bears holding dominance.
From the budget day’s high of 11,982, the Nifty50 has corrected for more than 500 points towards 11,461. The Fibonacci retracements of this entire move project the resistance at 11,660, 11,721 and 11,783 for Nifty.
There are multiple pieces of evidence projecting the support at 11,500 odd levels. The first support is placed at 100-DMA, and the second has been upward sloping trend line on the daily charts.
And, thirdly, the gap between 11,426 and 11,591 registered on May 20 as a reaction to the exit poll outcome will act as a support.
There has been a good amount of put writing had happened in 11,500 strike price in the recent past. So, for the Nifty, it is very crucial to hold its level above 11,500 on a closing basis.
Ichimoku Indicator on the daily chart has turned bearish as Nifty levels have now reached below the clouds. MACD and DMI indicators have also turned bearish on the daily charts.
From the derivative perspective, development has been bearish, as FIIs had net sold in Index and Stock future segment last week. The Nifty witnessed a short build up and there was a good amount of call writing took place in Nifty 11,600-11,700 strike prices last week.
To conclude, we believe that currently bears are holding the dominance and close below 11,500 would push Nifty towards the next support of 200-DMA, currently placed at 11,113.
Longs should be protected with the strict stop loss 11,500 on a closing basis. Unless Nifty closes above 11,800, Nifty would be considered in a bearish trend. Nifty Pharma Index is shaping good on charts and can outperform in the near future.
Here is a list of top three stocks which could give 8-10 percent return in the next three-four weeks:
Biocon: Buy| LTP: Rs 253 | Target: Rs 275 | Stop-Loss: Rs 240 | Upside 9 percent
Last week, the stock price closed with a bullish piercing line Candlestick pattern on the weekly charts. It recently found support in the gap formed between Rs 225 and Rs 241 during December 2017.
A partially filled gap can act a bullish reversal for the stock. The Relative Strength Index (RSI) has been moving higher with positive divergence.
The Nifty Pharma Index has also confirmed a higher top preceded by higher bottom on the daily charts. Considering the technical pieces of evidence discussed above, we recommend buying the stock at CMP, for the target of Rs 275, and keep a stop loss below Rs 240 on a closing basis.
UltraTech Cement: Buy| LTP: Rs 4,597|Target: Rs 4,920|Stop-Loss: Rs 4,344| Upside 10 percent
Last week, the stock price formed a bullish hammer candlestick pattern on the weekly charts. The cement sector has been outperforming in the recent past.
In the Quarter ending in June, the stock broke out from the long-term consolidation on the quarterly charts and fell in the correction phase.
A recent outperformance indicates that there would be a resumption of a primary uptrend in the stock. Oscillators are holding strong on the charts.
Considering the technical pieces of evidence discussed above, we recommend buying the stock at CMP, for the target of Rs 4,920, and keep a stop loss at Rs 4,344 on closing basis.
CESC: Buy| LTP: Rs 785| Target: Rs 850| Stop-Loss: Rs 760| Upside 8 percent
Power stocks have been in the limelight recently. Bullish “Flag” pattern breakout was witnessed on June 25 followed by the consolidation in the next four sessions.
The stock price is placed above all important moving average parameters. Looking at the setup, it seems that it will resume its primary uptrend. Oscillators have been showing strength on the charts.
Considering the technical pieces of evidence discussed above, we recommend buying the stock at CMP for the target of Rs 850 and keep a stop loss below Rs 760 on a closing basis.
(The author is Technical and Derivative Analyst at HDFC Securities)Disclaimer: 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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.