After falling in the last three sessions, the market appears to be oversold and hence may consolidate for the coming sessions with support at 22,100-22,000 zone. If the Nifty 50 breaks the same then 21,900 is the level to watch out for on the downside, but on the higher side, the index may face resistance at 22,300-22,400 levels, experts said.
On April 16, the Nifty 50 fell 125 points to 22,148 and formed a small bullish candlestick pattern with upper and lower shadows which resemble the spinning top kind of a pattern on the the daily charts.
The BSE Sensex declined 456 points to 72,944, while the Nifty Midcap 100 index fell 0.09 percent and Smallcap 100 index was up 0.75 percent.
Stocks that outperformed the broader markets on April 16 included LIC Housing Finance, Hindustan Aeronautics, and Samvardhana Motherson International. LIC Housing Finance gained 2.4 percent at Rs 654 and formed a long, bullish candlestick pattern on the daily charts after more than couple of weeks of consolidation with strong volumes. In fact, the volumes remained high for more than a weak, and the stock traded above all key moving averages.
Hindustan Aeronautics has also given a healthy breakout after couple of weeks of consolidation and rallied 2.6 percent to Rs 3,722 on the NSE. The stock has formed bullish candlestick pattern on the daily timeframe with above average volumes, while trading above all key moving averages.
Samvardhana Motherson International has seen a falling resistance trendline breakout adjoining highs of March 5 and April 12 this year, and jumped 2.86 percent to Rs 124. The stock has formed healthy bullish candlestick pattern on the daily charts with above average volumes and traded above all key moving averages.
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:
Samvardhana Motherson International
The analysis of Motherson involves considering recent bullish trends alongside cautionary signals, primarily focusing on its price movements and technical indicators. Despite its current appeal due to positive momentum, there are key factors to heed.
Examining the weekly scale chart reveals significant price movements and patterns. Notably, on March 28, 2023, the stock hit a low of Rs 61.40, followed by a peak of Rs 98.10 on September 5, 2023, constituting a 42-point increase from point A to point B. Similarly, on November 22, 2023, it reached a low of Rs 86.80 before climbing to approximately Rs 126, representing another rise of around 40 points. This pattern suggests a potential resistance zone around Rs 128-129 mark, where an exact 42-point rise (AB=CD) might act as formidable resistance.
Moreover, historical data from January 2022 shows that Rs 130-132 range has historically marked significant peaks. This further underscores the importance of the impending resistance zone.
Adding to the cautious outlook are insights from technical indicators, particularly the daily and weekly relative strength index (RSI), both of which remain below the 70 level. This indicates a likelihood of momentum loss near the anticipated resistance zone.
Given these factors, it's advisable to refrain from initiating new long positions at this juncture. Instead, it may be prudent to await a meaningful correction. For those already invested, considering booking profits within Rs 128-130 range would be a strategic move.
The analysis of LIC Housing Finance involves careful consideration of its recent bullish performance alongside potential warning signs, particularly concerning historical resistance levels and technical indicators. Despite its current appeal driven by positive momentum, caution is warranted as the stock approaches significant historical highs.
The reference to LIC Housing Finance's historical peak around Rs 701 in June 2017 sets the context for the cautious outlook. Reaching such a pivotal level suggests a potential resistance zone that could impede further upward movement. Moreover, additional caution arises from examining the daily chart, which reveals Rs 670 as the previous double top resistance level. If it fails to close above this mark, it may indicate the formation of a triple top pattern, a bearish signal indicating possible reversal of the uptrend.
Technical indicators further reinforce the need for prudence. Both the daily and weekly relative strength index (RSI) readings remain below the 70 level, indicating that momentum may be waning as the stock approaches the resistance zone. This suggests that the bullish momentum may struggle to sustain itself in the face of historical barriers.
Given these factors, it's advisable to refrain from initiating new long positions at this juncture. Instead, investors may consider awaiting a meaningful correction before entering the market. For those already invested, it may be prudent to consider booking profits within Rs 665-675 range, taking advantage of potential gains before the stock encounters significant resistance.
Hindustan Aeronautics' recent price movements indicate a bullish trend, supported by both technical price action and indicators. Between April 3rd and April 10th, 2024, the stock has been consolidating within the range of Rs 3,500-3,600. This consolidation phase suggests a period of price stabilization and indecision among investors. However, on April 12, 2024, the stock broke out cleanly above this consolidation zone and closed successfully above it. This breakout is a significant technical signal, indicating a potential shift in sentiment towards bullishness.
Furthermore, on April 15, 2024, there was a pullback in the stock's price, with it retracing to the upper boundary of the previous consolidation range at Rs 3,600. This pullback, which coincided with the previous resistance turning into support, serves to validate the bullish stance in the stock. It suggests that the breakout was not merely a false signal but rather a genuine indication of upward momentum.
Turning to technical indicators, the daily RSI is highlighted. The RSI is a momentum oscillator that measures the speed and change of price movements. In this case, the RSI has rolled back up above the key level of 70, indicating that the stock is in overbought territory. The current RSI reading of 72 further supports the bullish stance, suggesting that there is still potential upside momentum in the stock.
Based on this analysis, a trading strategy is proposed. Investors are advised to consider buying the stock in the zone of Rs 3,650-3,750. This range is chosen to allow for potential entry at a favourable price level while still capturing the upward momentum. The upside target for the trade is set at Rs 3,900, representing potential further gains from the current bullish trend. To manage risk, a stop-loss is recommended to be placed near Rs 3,599 on a daily close basis. This stop-loss level is selected to limit potential losses in case the bullish trend reverses, providing a clear exit point for the trade.
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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