With the formation of a dragonfly doji kind of candlestick pattern, which indicates potential trend reversal, at record high levels and after a consistent seven-day run-up, and momentum indicator RSI reaching the overbought levels (84) on the daily charts and showing negative crossover on hourly charts, experts turned a bit of cautious on the equity markets for the near term.
The Bank Nifty has also formed a Bearish Belt Hold kind of pattern at the record high levels (the bearish reversal pattern), which is also expected to be unsupportive to the market. Hence, some kind of consolidation at current levels can be possible in the coming days with the Nifty50 facing resistance at the psychological 21,000 mark and taking support at the 20,800-20,500 levels, experts said.
On December 6, the Nifty50 climbed 83 points to 20,938, and the BSE Sensex surged 358 points to 69,654, while the Nifty Midcap 100 and Smallcap 100 indices gained 0.25 percent and 0.4 percent, but the market breadth was largely equal.
Stocks that traded better than the broader markets and the benchmark indices included Tata Power Company, IRCTC, and Mazagon Dock Shipbuilders. Tata Power Company, after couple of days of consolidation, gained major strength and rallied 4.5 percent to end at record closing high of Rs 294, formed long bullish candlestick pattern on the daily charts with strong volumes, while on the weekly charts, the stock sustained uptrend after a decisive breakout of falling resistance trendline in previous week.
IRCTC has also seen a breakout of long downward sloping resistance trendline adjoining highs of January 17 last year and September 8 this year, and rose 3.5 percent to Rs 740.50 on the NSE. The stock has formed long bullish candletick pattern on the daily charts, with robust volumes.
Mazagon Dock Shipbuilders has also seen a breakout of horizontal resistance trendline adjoining multiple touchpoints on the higher side after several weeks of consolidation, and traded above all key moving averages (20, 50, 100 and 200-day EMA - exponential moving average). The stock has formed bullish candlestick pattern on the daily charts with healthy volumes.
Here's what Jigar S Patel of Anand Rathi Shares & Stock Brokers recommends investors should do with these stocks when the market resumes trading today:
Recently, the said counter has taken out its bearish trendline on a weekly scale, which is a positive sign for the counter. Having said that, it has consolidated above 100 DEMA (exponential moving average) for 7-9 months, before breaking the trendline, which is looking attractive at current levels.
On the indicator front, RSI (relative strength index) weekly has reversed from 50 levels, and DMI (directional movement index) weekly is positive, which further complements our bullish stance on the counter.
Thus, one can buy in the zone of Rs 730–745 for a target of Rs 805, and the stop-loss would be Rs 707 on a daily close basis.
In previous trading session, the said counter has taken out its previous trading range of Rs 1,950–2,050 and sustained above Rs 2,050 levels. Having said that, it has consolidated above 50 DEMA for 1 month, before breaking the above-mentioned trading range.
Breakout looks weird since it is accompanied by impressive volume. Thus, one can buy in the zone of Rs 2,100–2,120 for a target of Rs 2,400, and the stop-loss would be Rs 1,965.
Since March 2023, the said counter has been making higher highs and higher lows, which is a sign of a well-established bull trend. At the current juncture, it has taken out its April 2022 high of Rs 292.95 and is currently placed near Rs 294 mark.
Since DMI’s are positively poised, one can expect bullish momentum to continue in Tata Power. One can buy in the zone of Rs 294–295 for a target of Rs 310 and a stop-loss of Rs 286 on a daily close basis.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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