Tough in the very near term as the majority of the oscillators are in the overbought zone, the possibility of retracement towards the support zone cannot be ignored.
Dominating bulls are back as the benchmark index Nifty has conquered 11,000 psychological mark. Monthly Heikin candlestick pattern is flat bottom with higher high formations, at the same time, it has closed above the previous candle's high which suggests that the positive trend is still intact.
Nifty is trading above 200 DMA and interestingly this crucial moving average has stopped falling, implying mid-term price action to remain above it. The recent upmove of the index has filled an important bearish gap placed around 11,230 mark and any further move can fill another higher gap standing around 11,633 levels. Tough in the very near term as the majority of the oscillators are in the overbought zone, the possibility of retracement towards the support zone cannot be ignored.
Immediate support is provided by a line of polarity & 200 DMA near 10,800 mark. Every dip will be called correction; however, DTC (down trend continuation) leg will give confirmation only below 10,580 mark till then one can opt for buy on dip strategy.
Nevertheless, the crucial resistance zone on the higher side is near 11,600 provided by swing pivots & un-filled gaps. However, one needs to be cautious on a decisive move below 10,800 which will be an early sign of trend reversal.
Banking index traded typically in a range of 2,000 points throughout the last week but concluded with the highest closing in the last 4 months. Bank Nifty is trading with strong positive sentiments and it can trade towards 25,000 mark once it closes above 23,100 levels. Crucial support for the banking index is around 21,000 on the lower side for the upcoming week.
Here is the list of three stocks which could return 11-24 percent in the short term.
Ashok Leyland: Buy Around Rs 50 | Target: Rs 62 | Stop Loss: Rs 43 | Upside: 24 percent
On a daily chart, the stock has taken the support of its lower band of falling channel line formation in which the stock has been trading since the last many days which indicates a breakout movement in the counter. Moreover, bullish crossover in MACD also suggest a positive trend for the time being. Based on the above technical structure, one can take a long position in the stock around Rs 50 with stop loss of Rs 43 for the target of Rs 62.
Canara Bank: Buy Around Rs 101 | Target: Rs 121 | Stop Loss: Rs 89 | Upside: 20 percent
The stock has closed near its long term support zone and has experienced bounce back many times from the current levels. RSI is also turned positive on the weekly chart which suggests limited weakness in the stock and it can show pullback on the upside. The formation of dragonfly doji near key support is indicating the possibility of a pullback. This could bring the stock to test the long term moving averages as the potential target in the coming session. Traders can buy Canara Bank around Rs 101 with stop loss of Rs 89 for the target of Rs 121.
IndusInd Bank: Buy Around Rs 520 | Target: Rs 580 | Stop Loss: Rs 488 | Upside: 11 percent
Scrip spurted from a low of Rs 330 after forming Bullish Engulfing candlestick pattern, it showed pullback on upside marked the high of Rs 536 mark and started consolidating in the shorter time frame of the chart. Currently, it is waiting for the breakout on the upside so that it can accelerate buying momentum further. The emerging line of polarity on the daily time frame of the chart is suggesting bullish momentum in the scrip. Indicators and oscillators are also showing a conducive scenario in the coming sessions. So based on the mentioned technical structure one can go long in the scrip around Rs 520 for the target of Rs 580 mark with stop loss of Rs 488.
The author is Head of Technical Research at Narnolia Financial Advisors Ltd.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.