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Nifty & Nifty Bank hit record high: what should investors do now?

After breaking out from the bullish cup and handle pattern by surpassing 11,700 resistance, the Nifty50 moved higher gradually. The upside target for Nifty is seen at 12,300 for the short-term.

November 26, 2019 / 02:48 PM IST
 
 
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Vinay Rajani

The Nifty50 registered a record high above 12,103 in the morning trade on November 26. The Bank Nifty too broke out on the charts to record fresh highs above 31,783.

After breaking out from the bullish Cup and Handle pattern by surpassing 11,700 resistance, the Nifty50 moved higher gradually. The upside target for Nifty is seen at 12,300 for the short-term.

BankNifty has broken out from the downward sloping trendline adjoining all-time high 31,783 (31 May 2019 High) and 31,660 (5 July 2019 High). Fibonacci Extension levels are projecting the upside target at 33,300 in BankNifty.

By closing above 12,040, Nifty has violated the bearish implication of three consecutive weekly “Doji” candles.  This setup indicates that Nifty has resumed its primary trend and bulls have managed to remain to dominate after short term pause.

Close

The target for Bank Nifty is seen at 33,300 odd levels. The Nifty PSU Bank Index has broken out from the bullish “Inverse head and shoulder”.

Currently, the Nifty PSU Bank Index is placed at 2,600 odd levels and we expect it to rally toward 3,000 levels in the next 1 month.

Support for the Nifty has now shifted up from 11,490 to 11,800 levels. For BankNifty support is shifted towards 30,800 odd levels.

The Nifty Auto Index saw a healthy correction of more than 6 percent from the recent top made on Oct 30, 2019. The Nifty Auto Index touched its 200-DMA on November 25, 2019 and turned north.

The Nifty Midcap Index has been sustaining above its 200-DMA and now it is on the verge of breaking out from the downward sloping trend line on the weekly charts. Any level above 17,200 would confirm the breakout in the Midcap Index.

From the derivative side, Nifty and Bank Nifty both have seen a long build-up during the 25th November session.  Call Writers have started covering their shorts in Nifty 12000 strike price and the further short covering is expected in the days to come. Banks, Auto and Pharma Sectors are likely to perform well.

Here is a list of top three stocks which could give 7-10 percent return in the next 3-4 weeks:

Axis Bank: Buy | LTP: Rs 755 | Target: Rs 820 | Stop-Loss: Rs 707 | Upside 8 percent

The stock price has surpassed multiple top resistance placed around Rs 754 on a closing basis. The stock has broken out from the last 3 week’s price consolidation with higher volumes.

It has been forming higher tops and higher bottoms on the daily charts. BankNifty and Nifty Private Bank Indices have also broken out on the charts and the Banking sector is likely to outperform. Axis Bank carries good weight in the BankIndex.

Considering the technical evidence discussed above, we recommend buying the stock at CMP for the targets of Rs 820 and keep a stop loss at Rs 707 on a closing basis.

Maruti Suzuki India Ltd: Buy | LTP: Rs 7,236 | Target: Rs 7,720 | Stop-Loss: Rs 7,000 | Upside 7 percent

The Nifty Auto Index saw a healthy correction of more than 6 percent from the recent top made on 30 Oct 2019. The Nifty Auto Index touched its 200-DMA on 25 Nov 2019 and turned north.

We expect Nifty Auto Index to resume its uptrend from here.  Maruti carries high weight in the Nifty Auto Index. The stock has given a bullish “Flag” pattern breakout on the daily charts with higher volumes. Indicators have turned their direction again on the upside.

Considering the technical evidence discussed above, we recommend buying the stock at CMP for the target of Rs 7,720 and keep a stop loss at Rs 7,000 on a closing basis.

Canara Bank: Buy | LTP: Rs 226.5 | Target: Rs 250 | Stop-Loss: Rs 214 | Upside 10 percent

The Nifty PSU bank index has broken out from the bullish “Inverse head and shoulder”. Currently, Nifty PSUBank Index is placed at 2600 odd levels and we expect it to rally toward 3000 odd levels in the next 1 month.

Canara Bank carries good weight in the Nifty PSUBank Index. Canara Bank itself has broken out from bullish “Inverse head and shoulder” pattern with higher volumes. After 3 days of consolidation, the stock has resumed its uptrend.

Considering the technical evidence discussed above, we recommend buying the stock at CMP, for the target of 250, and keep a stop loss at 214 on a closing basis.

(The author is Technical and Derivative Analyst at HDFC Securities)

Disclaimer: The views and investment tips expressed by investment experts 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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