The market snapped three weeks' losing streak on the back of buying seen in the banking sector during last week. Nifty traded in a tight range of 11,900-11,640 forming a bullish candlestick pattern. Current weekly candlestick pattern formation suggests strong uptrend to unfold if Nifty closes above the previous week’s high of 11,910.
Nifty is trading near its major simple moving average 50-DMA, which is rising and placed around 11,700. At the same time, RSI indicator on the monthly timeframe is trading around 65 that signifies positive momentum. Also, RSI on weekly time frame took a reversal from 50 forming pullback buy pattern. It is currently trading around 60 indicating a high probability of original trend to re-begin.
Major trend line support on lower time frame and principle of polarity is near 11,575-11,600. Our buy on dip strategy is valid till Nifty stays above the strong demand zone at 11,575.
Nifty future rollover data till June expiry is 80 percent, which is higher than last month’s rollover data of 71 percent as well as greater than 3 month’s average rollover of 77 percent indicating strong trading interest ahead of the Budget.
Bank Nifty
After opening lower, Bank Nifty took support from strong support zone of previous swing low and 38.2 percent Fibonacci retracement levels placed around 30,500 forming long body bullish candlestick pattern. It has also given confirmation of trend reversal by closing above last week’s high (30,824).
As long as low of the previous week (30,451) is intact, it will trade higher towards its life high placed around 31,783. Moreover, the trading range for the banking index will be 30,800-31,700 for the coming week.
Here are five short term picks:
Bank of Baroda | Rating: Buy around: Rs 120 | Target: Rs 145| Stop loss: Rs 104 | Upside: 21 percent
The stock has corrected from the peak of Rs 144 and has shown signs of bottoming out around Rs 115. Formation of rounding bottom on the daily chart is showing a positive move on the upside. Long bullish candle near the point of polarity on the weekly chart is showing the possibility of a bounce back further on the upside. With decent volume participation witnessed, we recommend a buy in this scrip around Rs 120 for an upside target of Rs 145 with a stop loss of Rs 104.
Punjab National Bank | Rating: Buy around Rs 78 | Target: Rs 89 | Stop loss: Rs 73.60 | Upside: 14 percent
Prices of PNB has seen a rebound after hitting a low of Rs 73 where its key support is seen. The emergence of morning star on the weekly chart is giving the possibility of a pullback on the higher side in the coming sessions. RSI has started curling up after testing its oversold zone and daily MACD has given bullish crossover in positive territory. Buy around Rs 78 with a stop loss of Rs 73.6 and target at Rs 89.
Canara Bank | Rating: Buy around Rs 280 | Target: Rs 310 | Stop loss: Rs 259 | Upside: 11 percent
Recently, the stock gave trend line break out on upside that suggests trend reversal on the daily chart. From last few days, it has been trading above its 20, 50, 100 and 200-DMAs that indicates strength. Formation of the green candle while giving trend line breakout indicates stock can surge further. Buy Canara Bank around Rs 280 with a stop loss of Rs 259 for the target of Rs 310.
Dredging Corporation of India | Rating: Buy around Rs 425 | Target: Rs 470 | Stop loss: Rs 398 | Upside: 11 percent
The stock price gave Pole and Flag breakout out on upside that suggests trend reversal on the daily chart. From last few days, it has been trading above its 50,100 and 200-DMAs along with bullish crossover that indicates strength. Formation of bullish belt hold, while giving breakout indicates stock can surge further.
Bharat Petroleum Corporation | Rating: Buy around Rs 390 | Target: Rs 420| Stop loss: Rs 369 | Upside: 8 percent
The stock has given a decent correction from the peak of Rs 414 to Rs 373 and has taken support at its lower levels. Now it has regained strength indicating a positive bias. Sustainability above the rising trend line is suggesting upside strength. The emergence of bullish engulfing on the weekly chart is further showing strength.
We anticipate the stock to rise further in the coming days with strength in volume. One can take a long position around Rs 390 for the target of Rs 420 with a stop loss of Rs 369 on a closing basis.
The Author is Head of Technical & Derivative Research at Narnolia Financial Advisors.
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.
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