Vinay Rajani
Last week, Nifty rose 1.53 percent and negated bearish implications developed from the ‘Weekly Engulfing Pattern’ formed for the week ended December 6, 2019.
After finding a double bottom around 11,850, Nifty resumed its primary uptrend and closed above the crucial resistance placed around 12,150.
Nifty has reached above all important moving average parameters. The immediate resistance for the Nifty50 is seen around 12,350, which happens to be the upward sloping channel resistance on the weekly charts.
As far as supports are concerned, a level of 11,850 has become the floor for the Nifty, while the short-term support is seen in the range of 12,100-12,150.
Above 12350, the Nifty50 is expected to extend the rally towards targets of 12,865 and 13,716, which happens to be 100 percent and 138.2 percent Fibonacci extension levels by taking a swing of 10,004 (Bottom Oct-2018), 12,103 (Top - June 2019), and 10,637 (Bottom Aug-2019).
Bank Nifty has taken out the crucial resistance zone of 32100-32150, which have been similar tops formed in the previous three consecutive weeks.
Positional Target for Bank Nifty is seen at 33300, derived from rising wedge on the monthly charts. A level of 31000 seems to have become the floor for the Bank Nifty, while the short-term support for the same is seen at 31900.
The Nifty Midcap index is on the verge of breaking out on the long-term chart, and any level above 17340 in the Nifty Midcap Index would result in a long-term downward sloping channel breakout.
We believe that the Nifty and Bank Nifty have taken out important resistances and we expect the rally to continue. A close above 12350 could take the index towards 12,865 and Bank Nifty is headed towards 33300.
Most importantly the bullish developments on Nifty500 index project market breadth to improve from here.
Here is a list of top three stocks that could give 9-14% return in the next 3-4 weeks:
Sudarshan Chemical: Buy| LTP: Rs 404| Target: Rs 460| Stop-Loss: Rs 385| Upside 14%
For the last 8 weeks, the stock has been consolidating in a narrow range. The 50-DMA has acted as strong support in the recent past.
On 23rd December, the stock price has closed at an 8-week high with a rise in volumes, indicating higher chances of breaking out from the recent consolidation.
Tata Metaliks: Buy| LTP: Rs 612| Target: Rs 675| Stop-Loss: Rs 575| Upside 10%
The stock price has been consolidating for the last 8 weeks in a narrow range of Rs 570 to Rs 620. The stock price has formed multiple bottoms around 570 in the recent past.
A close above Rs 620 would push the stocks towards the upside target of 675. It is sustaining well above its 200-DMA resistance which is a positive sign.
AU Bank: Buy| LTP: Rs 791| Target: Rs 860| Stop-Loss: Rs 760| Upside 9%
The stock has witnessed a running correction in the last 6 weeks with lower volumes. On the week ended 15th November 2019, the stock prices have surged and gave a multi-month breakout with volumes.
Considering the primary uptrend, the recent correction in the price should be utilized to accumulate long positions.
(The author is Senior Technical and Derivative Analyst, HDFC Securities)
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