A sustainable move above 10,900 could propel the index back towards the high of 11,141 but for a much stronger base confirmation the index needs to clear the 11,200 mark
During the past couple of sessions, the Nifty has managed to stage a smart bounceback from its crucial support placed at 10,740 levels.
The above level is the 78.6 percent Fibonacci retracement of the relief rally that started from 10,637 to 11,141.
From here on, if the Nifty holds above 10,740, it could possibly make an inverse head and shoulder pattern on the daily chart. But, that's too early to predict.
On the upside, a sustainable move above 10,900 could propel the index back towards the high of 11,141, but for a much stronger base confirmation the index needs to clear 11,200.
On the contrary, a breach of 10,740 might put the low of 10,637 under threat and can bring the index down towards 10,550 levels.
On the derivatives front, the long-short ratio in index futures by FIIs have reached 20 percent. Generally, such a low ratio results in heavy short covering. If we compare it with the technicals, then 10,900 could be an important trigger for bulls.
Here is a list of top three stocks which could return 4-16% in the next three-to-four weeks:
State Bank of India: Buy| CMP: Rs.273 | Target: Rs 290 |Stop Loss: Rs.260 | Upside 6.2%
The stock has been constantly correcting from the top of Rs 373 without any meaningful pullback and has now reached near Rs 270 mark. The stock is in oversold territory.
At this juncture, SBI is resting exactly at the placement of 200-weeks Simple Moving average (SMA). The stock has the support of multiple bottoms near Rs 260 mark. The placement of weekly RSI indicates a possibility of a bounce.
Traders are advised to buy the stock in the range of Rs 272 – 268 with a stop of Rs 260 for an upside target of Rs 290.
HDFC Bank: Buy| CMP: Rs.2235 | Target: Rs 2375 |Stop Loss: Rs 2225 | Upside 4.4%
The recent correction from the top of Rs 2,497 got arrested exactly near the placement of 200-days Simple moving average (SMA).
From there every time the stock turned below the said average, we have witnessed some buying interest which helped it to come back above the same.
This price action has now taken the shape of an inverse Head & Shoulder pattern (bullish) which will get confirmed above Rs 2,275.
In addition, the stock has turned from its long term trend line positioned near 2150 which indicates fresh upside in the offing.
Traders are advised to buy the stock once it clears the hurdle of Rs 2,275 for the upside target of Rs 2,375, and a stop loss below Rs 2,225.
LIC Housing Finance: Sell| CMP: Rs.395 | Target: Rs 330 |Stop Loss: Rs.440 | Downside 16%
Due to the recent fall, the stock has been trading in an oversold terrain on the lower degree charts.
However, the long-term charts indicate that the stock is hovering just above the multi-year support of Rs 380, and a move below the same could be frightening.
A close below Rs 380 could open the doors for lower levels like Rs 330 – 300 in the coming months.
So going ahead, let’s assume that the stock breaches Rs 380 mark, and in that scenario, one should wait for a bounce considering it is showing in an oversold territory.
After the bounce back, traders are advised to exit longs or create shorts in the stock between Rs 400 - 410 levels for the downside target of Rs 330 with a stop of Rs 440.
(The author is Sr. Technical & Derivative Analyst at India Nivesh Securities Limited)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.