On the higher side, Nifty could move towards its immediate resistance level of 11,200. Any close above 11,200 levels would result in further short covering, which might push Nifty to 11,450 levels
The Nifty fell 72 points on September 16 as crude oil prices surged more than 10 percent following the September 14 drone attack on Aramco’s production and refining facilities. A weaker rupee versus the dollar also dampened sentiment.
Though Nifty has fallen, it is still trading above its 20-Day SMA. Oscillators and momentum indicators like RSI and MACD have been showing strength on the daily as well as weekly charts for the Nifty and Bank Nifty.
The Nifty has been trading in the Symmetrical Triangle on the daily chart. Last week, we saw the index reaching near the higher band of the triangle placed around 11,090 levels. This level could act as a short-term resistance.
In derivatives, we have seen Put writing at 10,800-11,000 strike prices, which indicates that the index is likely to find strong support around 10,800 levels.
Unless Nifty closes below it, the trend would be considered bullish for the markets. On the upside, 11,200 levels, where Calls have been written, is likely to act as an immediate resistance. This resistance level also coincides with the 200-Day SMA which is placed at 11,224 levels.
As anticipated in my last column, dated August 26, the advance-decline ratio remained positive for the last eight sessions on the trot. This has happened for the first time after August 2018, where the advance-declined ratio remained positive for 11 days in the row.
Midcap and smallcap indices are likely to continue their outperformance in coming days.
To conclude, the short-term trend for the Nifty and Bank Nifty is bullish. Therefore, our advice would be to accumulate longs in the Nifty with a stop loss around 10,800 levels.
On the higher side, Nifty could move towards its immediate resistance level of 11,200. Any close above 11,200 levels would result in further short covering, which might push Nifty to 11,450 levels.
We continue to believe that mid and smallcaps will continue their outperformance as compared to broader indices in the coming days.
Here is a list of top three stocks that could return 6-12 percent in the next three-to-four weeks:
Britannia Industries Ltd: Buy| LTP: Rs 2,715|Target: Rs 2,869|Stop-Loss Rs 2,630| Upside 6%Britannia Industries stock price has broken out from the consolidation range on the daily chart by closing above the resistance level of Rs 2711.
The short-term trend of the stock is bullish as the stock price is trading above its 5 and 20-Day SMA. Oscillators and momentum Indicators like RSI and MACD showing strength in the stock on the daily and weekly charts.
In the F&O segment we have seen long build up in the stock. Therefore we recommend buying Britannia Industries for the upside target of Rs 2,869, and keep a stop loss below Rs 2,630.
GNFC: Buy| LTP: Rs 198| Target: Rs 218| Stop-Loss: Rs 186| Upside 10%
After forming a double bottom formation around Rs 172 odd levels, the stock price reversed northward to cross its 5 and 20-Day SMA.
The stock price has already broken out from the downward sloping trendline, adjoining highs of May 27 and August 9. Oscillators and momentum Indicators like RSI and MACD showing strength in the stock.
Fertilizer as a sector looking good on the charts. Therefore, we recommend buying GNFC for the target of Rs 218 and keep a stop loss below Rs 186.
Maithan Alloys: Buy| LTP: Rs 505| Target: Rs 566| Stop-Loss: Rs 468|Upside 12%
Maithan Alloys stock price has broken out on the daily chart last week by closing above the resistance level of Rs 469 levels with higher volumes.
The stock price closed above 200-Day SMA with higher volumes on Monday. Oscillator like RSI is forming positive divergence in the stock on the daily charts.
Therefore, we recommend buying Maithan Alloys for the upside target of Rs 566 and keep a Stop Loss below Rs 468.
(The author is Senior Technical & Derivatives Analyst at HDFC Securities)
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