One relief rally in Bank Nifty towards 25,000 levels cannot be ruled out. Conversely, the confirmation of short-term reversal will be seen on a daily close above 22,500.
Indian markets have not been left undamaged from the coronavirus pandemic. We saw a sharp fall in the last week whereby Nifty traded below the 8,000-mark almost after 4 years and touched 7,832-levels on the downside.
The index managed to take support from the demand zone standing around 7,800-8,000 levels on a quarterly time frame. At the same time, Nifty has temporarily halted its down move by closing above crucial resistance of 8,600.
Moreover, short-term trend reversal confirmation will arrive on a daily close above 9,150 levels which is the highest high mark of the last three days’ candle. Conservatively, relief rally towards unfilled gap territory (9,600) cannot be ruled out.
The index has given a fall of 4,000 points in the last three weeks which has put the majority of the oscillators in the oversold zone, monthly Commodity Channel Index (CCI) is standing at -289 which is below oversold levels of -200 which indicates highly oversold markets and daily CCI is placed around -112 with positive divergence implying short term price reversal in process.
Additionally, the stochastic oscillator is showing a positive divergence on the daily time frame which has also accelerated the confidence in the price reversal.
Furthermore, 5 weeks EMA is trading around 10,200 and as long as Nifty is trading below these levels, one should trade with sell-on-rise strategy. Nonetheless, a decisive close below strong demand zone of 7,800 can push the index towards the line of parity on the monthly time frame standing around 7,300 marks.
Banking Index continued to extend its losing streak for the sixth week as an intensified sell-off throughout the week was seen. However, relief rally on the last trading session pushed it above crucial psychological levels of 20,000.
As a majority of the oscillators are in the oversold zone, one relief rally towards 25,000 levels cannot be ruled out. Conversely, the confirmation of short-term reversal will be seen on a daily close above 22,500.
Below are the 3 stocks that can return 11-21%
The India Cements: Buy above Rs 102 | Target: Rs 124 | Stop Loss: Rs 88 | Upside: 21%
The stock has formed a Double-Bottom on the weekly chart and is on the verge of breaking the downward sloping trend line. The momentum indicator MACD has crossed the signal line indicating a start of a trend. The RSI too is above its key 50-mark indicating positive momentum on its side.
It was until recently undergoing a larger time frame consolidation which we think was a pause in the larger trend. Overall breakout is expected to come above 102 levels for further strong bullish momentum. We recommend a buy above 102 keeping a stop loss of 88 for the target of 124.
Bharti Airtel: Buy around Rs 420-430 | Target: Rs 500 | Stop Loss: Rs 380 | Upside 16%
After hitting the peak of Rs 550, the stock slipped lower till Rs 380 from where the chances of developing demand are higher. It has been trading in a range-bound zone of Rs 550 and Rs 375 mark. Currently, the stock is trading near its multi-support horizontal line and the point of polarity on the daily chart is giving cues to accumulate this stock at lower levels.
Positive divergence in MACD on the daily chart suggests upside momentum. As long as it sustains above Rs 400, the possibility of moving on the upside is higher and it can hit our first target of Rs 500. We recommend buying Bharti Airtel around Rs 425 with a stop loss of Rs 380 for the target of Rs 500 levels.
Hindustan Unilever: Buy around Rs 1975-1990 | Target: Rs 2208 | Stop Loss: Rs 1825 | Upside 11%
The occurrence of bullish engulfing at bottom levels showing an upsurge move on the higher side. RSI took a flip on the positive side from its oversold levels creates positive sentiment. Moreover, the declining histogram of MACD also looking conducive for the scrip. Furthermore, strong support is seen near 1900 levels where 200 DMA is seen.
Breakout is expected to come above Rs 2060 from where buying momentum in the stock will increase in the coming sessions. By looking at all these mentioned factors, we recommend buying HUL around Rs 1975-1990 for the target of Rs 2200 and Rs 2250 with a stop loss of Rs 1,825-mark on closing basis.
The author is Head of Technical Research at Narnolia Financial Advisors Ltd.
Disclaimer: The views and investment tips expressed by investment experts 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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