'Long build-up in Bank Nifty ahead of RBI policy meet; range capped at 32K'

As long as Nifty is trading above 11,600, we maintain buy on dip strategy, said Shabbir Kayyumi of Narnolia

June 03, 2019 / 02:40 PM IST
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Todays L/H

Nifty revisited a record high of 12,041 while maintaining its underlying bullish bias. The index faced resistance on the higher side near upper Bollinger Band in the monthly time frame and a monthly R2 pivot point placed around 12,000 that resulted in some profit booking in the last trading session of the last week.

The ADX indicator has cooled off from its higher levels of 40 to 32, indicating that its strong strength is still intact as it is trading above the 25. Recently, the RSI on the weekly time frame took a reversal from 50, forming a pullback buy pattern and currently trades around 65 indicating the completion of correction sell leg.

Nifty is trading above its two major simple moving averages 20-DMA and 50-DMA, which are rising and placed around the 11,600, whereas the occurrence of crossover formation in them has signaled a strong uptrend to unfold in mid term.

Moreover, the immediate resistances for the index are: 12,041 (life high) and 11,980 (trend line resistance) and crucial support is around the 11,600, which is previous week’s low price and 20-day simple moving average (SMA). As long as the index is trading above 11,600, we maintain buy on dip strategy.

Bank Nifty:


Bank Nifty hit a new high on reaching the 31,783 on May 31, though it settled lower at around 31,375. Bank Nifty's rollover data is at 81 percent, which is the highest in the last six months, suggesting a long build up in banking index ahead of the RBI policy. The technical range of banking index will be 30,200-32,000 for the coming week.

Here are five buy ideas:

Jai Corp | Rating: Buy around Rs 122 | Target: Rs 140 | Stop loss: Rs 113| Upside: 15 percent

Stock price of Jai Corp has seen a rebound after hitting a low of Rs 96 where its key support is seen. The emergence of the morning star pattern on the weekly chart is giving the possibility of a pullback at the higher side in the coming sessions. RSI has started curling up after testing its oversold zone and daily MACD gave a bullish crossover in negative territory thus supports bullish bias in the stock. We suggest buying around Rs 122 with a stop loss of Rs 113 and target of Rs 140.

NTPC | Rating: Buy around Rs 126 | Target: Rs 142 | Stop loss: Rs 118 | Upside: 13 percent

The stock has witnessed a decent correction recently from the peak of Rs 142 and now has shown indication for the formation of an Inverse H and S pattern, where construction of right shoulder is underway. From last few days, it has been trading above its all significant moving averages that indicate strength. Indicators and oscillators are also looking firm lending support to price action. With the chart looking attractive and decent volume participation witnessed, we recommend a buy around Rs 126 for an upside target of Rs 142 and keep a stop loss of Rs 118.

Berger Paints | Rating: Buy around Rs 320 | Target: Rs 355 | Stop loss: Rs 303 | Upside: 11 percent

The stock bottomed near Rs 296 and formed a double bottom pattern on the daily charts that suggests buying momentum is coming back. The formation of a bullish belt hold on the daily charts indicates upside movement in the coming sessions. Positive crossover in MACD on the hourly chart is also creating positive rhythm in the scrip. Furthermore, the sustainability of RSI on daily chart above 9-EMA’s adds the conviction of buying the scrip around Rs 320 for the target of Rs 355 with a stop loss of Rs 303.

Hindalco Industries | Rating: Buy around Rs 191 | Target: Rs 210 | Stop loss: Rs 182 | Upside: 10 percent

On a weekly chart, the stock has taken support from its horizontal trough due to the concept of point of parity which indicates halt in the downswing of the scrip. On the daily chart, it took its support from a rising trend line, which gives a buying opportunity to the scrip. Moreover, declining histogram in MACD on the hourly chart indicates positivity in the counter. Based on the above technical set up, we are expecting an upside momentum in the counter in the coming days for the target of Rs 210 with a stop loss of Rs 182.

Tech Mahindra | Rating: Buy around Rs 748 | Target: Rs 815 | Stop loss: Rs 717 | Upside: 9 percent

The stock has confirmed the reversal from its current downtrend. It also gave a trend line and thereafter it is consolidating above 200-DMA since the last few days. A rising trend line support creates a buying opportunity in the scrip. The formation of higher lows is also indicating a positive move in the coming days. So some fresh buying is expected from the current levels in the short term. Therefore we are recommending taking a long position in the stock near Rs 748 with a stop loss at Rs 717. Upside target is Rs 815.

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.
Shabbir Kayyumi is the Head of Technical & Derivative Research at Narnolia Financial Advisors. He has rich experience in Technical Analysis across Equities, Commodities, Global Indices and Global Currencies. His strength lies in Elliott wave and Neo Wave theory while he is equally proficient in Candlestick patterns, Fibonacci, price projection, classical Dow Theory, and inter market analysis for interpreting market trends.
first published: Jun 3, 2019 02:40 pm

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