According to the Dow Theory, Nifty is in a short-term bearish trend
The Nifty50 registered an all-time high at 11,760 on Aug 28, 2018 and reversed the trend towards the south. The Nifty has been forming lower tops on the daily charts.
First, the lower top was formed at 11,603 on September 7, 2018 followed by 11,523 on Sept 14, 2018. The Nifty is also in the process of forming lower bottoms on the daily chart.
According to the Dow Theory, Nifty is in a short-term bearish trend. The index has also been trading below its 20-DMA, which is currently placed at 11,545.
Recovery is seen from 11,250 to 11,523 during 12th and 13th September with subdued volumes and can be considered as a technical pullback in the overall downtrend.
During this pullback, the Nifty has failed to surpass the 61.8% Fibonacci retracement (11,565) of the entire fall seen from 11,760 to 11,250.
On September 17, Nifty breached the crucial 11,400 support derived from the heavy put writing at 11,400 strike price in derivatives and also from the gap-up which was formed on Sep 14, 2018 in the range of 11,380-11,430.
The only thing which can save Nifty to weaken further is higher bottom followed by the higher top and that too without breaching the recent low of 11,250.
If Nifty manages to recover from current levels and surpasses the previous top of 11,524 decisively then it would result into a bullish trend reversal. Till this happens, Nifty would remain in a bearish trend.
Oscillators and Indicators on the short-term charts indicate weakness in the market. If Nifty breaks 11,250, it would result into violation of the 50-DMA support.
Below 11,250, Nifty could plunge towards 11,000, a support derived from 100-DMA and bearish head shoulder pattern target on the Nifty daily charts.
As far as Bank Nifty, it has been underperforming and closed near the lowest level of this entire fall. The level of 27205 has become strong resistance and unless it is taken out, one should remain bearish in the Banks.
Supports for the BankNifty are seen at 26555 and 26100. The sector which looks strong on the chart in the current scenario is the metal and Nifty Metal Index is expected to outperform in the coming days.
Here is a list of top three stocks which could give 8-15% return in the next 1 month:
Jindal Steel and Power Ltd: Buy| LTP: Rs 238 | Target: Rs. 257| Stop-loss Rs 225 | Return 8%
The stock has surpassed the crucial resistance of 200-DMA. The Nifty Metal index is looking strong on the charts and is likely to extend further.
A bullish inverse head and shoulder pattern breakout are seen on the daily charts. The stock price has broken out from the long-term downward sloping trend line on the weekly charts with healthy volumes. Oscillators have also turned bullish on weekly and monthly charts.
Tinplate Company of India Ltd: Buy| LTP: Rs 196.20 | Target Rs. 225| Stop-loss Rs 182 | Return 15%
The stock price has broken out from the long-term downward sloping trend line on the weekly charts with healthy volumes. The metal stocks have been outperforming for the last many days and strength is spilling over from large-cap Metal stocks to midcap metals stocks.
The stock is trading above its 20 and 50-DMA, indicating a bullish trend on a positional basis. Considering the technical evidence discussed above, we recommend buying the stock at CMP for the target of Rs 225 and keeping stop loss placed below Rs 182 on a closing basis.
OFSS: Buy| LTP: Rs 4503| Target Rs. 4950 | Stop-loss Rs 4250 | Return 10%
The stock price has registered a new all-time high with a significant jump in volumes. The stock price has surpassed triple top resistance placed at 4450 odd levels on the monthly charts.
The stock price reached above its 50, 100 and 200 DMA, indicating bullish trend reversal for medium to long term. Oscillators have also turned bullish on the long-term charts.
Considering the technical evidence discussed above, we recommend buying the stock at CMP for the target of 4950, keeping a stop loss at 4250 on a closing basisDisclaimer: The author is a Technical Analyst, HDFC Securities. 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.The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .