Buy these two stocks for gains; Nifty may stage a sharp rebound from current levels


By Rohan Patil

The benchmark saw a sharp sell-off and broke its important short-term support and closed with a loss of more than 5% on the weekly chart. The index closed below its 52-week low during Friday’s session and breaks its important support which is placed at the 15400 levels. For the first time since July 20, Nifty closed below its average exponential moving over 100 weeks and it is a bearish sign for the index. Price formed a bullish ABCD harmonic pattern at the 15350 levels, but the selling impact was so powerful that prices closed below this level. We are still in the potential reversal zone and a strong rebound from the current level cannot be ruled out.

In Friday’s session, there was indecision among traders and the result was that prices formed a Doji candlestick pattern on the daily time frame. Prices on the daily chart closed below its exponential moving average (21, 50 and 100) days. As the indicator on the smaller timeframe is extremely oversold, so the next session may belong to bulls, but short-term traders are advised to wait for more stability before initiating a trade. Immediate support for the index is placed at the 15150 and 15000 levels and if prices hold above the 15400 levels, 15650 may be a possible bullish level for the index.

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Since opening the gap lower on June 13, Bank Nifty has never retested its higher levels and continues to trade lower throughout the week and closed down 5% based on the weekly closing. The Bank Nifty was trading in a falling wedge formation combined with a lower high pattern on the daily chart and in this sharp drop prices are approaching its lower pattern band. The banking sector is also holding below all major averages on the daily chart, indicating that a strong downtrend is unfolding. The momentum oscillator RSI (14) on the daily scale has formed a double bottom formation near oversold levels, indicating the possibility of a pullback over the next few trading sessions.

Over the past few weeks we have seen a distribution pattern in the Banking Index from 36,000 to 34,000 and prices have formed a small degree rounding the upper formations a few times. As the indicator on the smaller timeframe is extremely oversold, so the next session may belong to bulls, but short-term traders are advised to wait for more stability before initiating a trade. Immediate support for the Bank Index is placed at the 32000 and 30500 levels and if prices hold above the 33600 levels, 35000 may be possible bullish levels for the index.

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Objective: Rs 274|Stop Loss Rs 241
Yield: 7.9%

The previous week, we saw that prices gave a breakout of a trend line on the weekly chart which was placed at 260 levels. And the prices after the breakout have completed their retracement, which is close to its trendline support. Prices also formed a bullish hammer candlestick pattern on June 15 near its trendline support. The stock is trading above its 21- and 50-day exponential moving average, which sits at 259.8 and 246 levels. Previously, when the price retraced near its 21 DEMA, it would witness a strong reversal to the upside. Looking at the larger timeframe, prices have given 28 weeks of consolidation breakout and the meter is holding well above its trendline support. In addition, the breakout was observed with above-average volumes.

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Target Rs 464|Stop Loss Rs 411
Yield: 7%

After a sharp drop, prices formed a bullish engulfing candlestick on the daily chart and prices rebounded strongly from the 163 levels and rose over 5% in a single day. Prices have also formed a double bottom on the daily chart and the recent rally has formed the meter to close above its 21-day exponential moving average. On the weekly timeframe, price formed a long tail on the lower side and a small body on the upper side indicates that a reversal from the lower levels may continue. Additionally, Friday’s candle engulfed its previous four-day candle and showed a strong base formation near the lower levels.

(Rohan Patil is a technical analyst at Bonanza Portfolio. Opinions expressed are those of the author. Please consult your financial advisor before investing.)



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