Nifty's glorious sprint is in no mood to relent. In last week’s action, the intra-day correction was short-lived as index recorded yet another high last week and hovering around three-digit Gann number of 127(00). Traders must always respect trading range breakouts, by not unduly worrying over the substantial market run-up (up by over 10 percent in November so far).
As per our Breadth analysis, percentage of Nifty constituents trading above 200-DMA is 88 percent (i.e. highest in the last five years). In an uptrending market structure, breadth tends to move between 80-84 percent zone as seen earlier in 2017, wherein, Index gradually moved higher with breadth at an overbought zone.
In this kind of scenario, price-wise/time-wise correction within Nifty tends to provide buying opportunities with sector churning theme dominating headline.
Ratio of BankNifty/Nifty has the overhead hurdle of 50 percent retracement of the entire move from Feb peak to March low. The same is placed around its 250-DMA, which appears to be a tough supply zone, implying a pause in recent outperformance of BankNifty.
There are no new worries before the market in India. But re-balancing action could cause jerks. Private banks have been the major movers in the last few weeks. However, the search for new leaders is likely to invite new sectors to the field of action.
Here are the Diwali picks by Pritesh Mehta
From April to September 2020, Siemens consolidated within a structure of identical tops and ascending bottoms. This month, the stock broke above the upper boundaries of the consolidation zone. On P&F chart, the structure of rising bottom triple top buy, triple top buy and bullish turtle breakout is seen. Series of bullish anchor columns and positive follow-through is in place since May 2020.
Siemens is moving higher with the support of its objective trendline. We expect a continuation of the recent uptick. Buy Siemens above Rs 1,350 with a stop loss of Rs 1,250 for a target of Rs 1,570.
On broader charts, the stock has engulfed the decline seen in Feb & March of 2020 and in the process, it broke above the barrier (i.e. hurdle zone of Rs 225 i.e. three-digit Gann number) in place since 2018. A shift of range on the upside has led to a strong momentum rally towards Rs 361.
Currently, it has taken a pause around three-digit Gann number of 361, which indicates hiatus in an ongoing uptrend. Such a phase in an uptrending counters tends to result in the resumption of the prevailing rally. Corrective move towards Rs 345-350 should be considered as buying opportunity. On the upside, the stock has the potential to rally towards Rs 470 zone.
On a broader horizon, Crompton had been moving in a range with the point of polarity zone coming to its rescue back in March 2020 i.e. around Rs 190-200. Thereafter, pullback had been gradual and the stock eventually broke past its big tall red bar in September 2020.
Sustenance above Rs 300 would result in a shift of range on the upside. It has upside potential to stage a rally of more than 20 percent with multiple support seen around Rs 250. On P&F chart, Bear Trap reversal and a bullish turtle breakout is seen i.e. multiple bullish formations in an uptrending counter.
Tata Consumers went through a phase of a sharp decline in September & October 2020 as it corrected from the peak of Rs 592 and recorded a swing low of Rs 459. The same coincided with 50 percent retracement mark of the entire move from May 2020 low. The confluence of support halted the declining spree. The pattern of Bear trap reversal and a bullish anchor column on P&F chart at support zone indicates more legs on the upside.
Currently, it is consolidating at the bottom, breakouts from such patterns in an up trending stocks tend to provide swift up moves. We expect a rally of 15-18 percent in medium-term with support placed around Rs 470 zone.
It is attempting to breakout from a phase of sideways correction. In the month of September 2020, the stock marked a low around three-digit Gann number of 121 and thereafter has been gradually moving higher. Despite moving in a narrow range, it is holding above support of its rising trendline. In such a scenario, traders should always use any phase of consolidation and breakout from the same to build longs.
From Gann perspective, whenever a confluence of support is defended, the pullback tends to be excessive. Pattern of bullish anchor columns and follow-through is seen since August 2020. ABC breakout with a potential target of Rs 170-175. Support is seen around Rs 131.
After a prolonged downtrend, the stock consistently trended higher from its March month’s low. In September, the stock has witnessed a positive break above long-term supply line implying positive outlook for the stock. It is trading around the peak of January 2020. It is moving higher along with the support of its 20-Weekly MA since June 2020, wherein every pullback towards this critical moving average has resulted in buying opportunity.
Sustenance of two-digit Gann number of 81(0) would result in a shift of range on the upside. A pullback towards Rs 780-770 zone should be considered as buying opportunity as the stock could gradually trend higher towards 950. Levels of Rs 730-735 are likely to act as an important support zone.
(The Author is Lead Technical Analyst - Institutional Equities, YES SECURITIES)
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