Going forward, given the speed and the extent of fall, a small rebound cannot be ruled out up to 11,400 levels once again. For the entire bearish pattern to get negated, Nifty has to surpass the right shoulder’s peak of 11,603 levels.
Hadrien Mendonca
The Indian equity markets have been on a selling spree extending its losing streak for the third consecutive week. The sharp fall could be attributed to rising crude oil prices, weakening rupee and escalating trade war tensions between the US & China.
The PSU banks led the decline in markets. The fall was seen after the Finance Minister earlier in the week announced the merger of three banks namely Bank of Baroda, Vijaya Bank, and Dena Bank.
The Nifty has witnessed unabated selling pressure as the index broke down from a bearish Head and shoulder pattern on the daily chart, which is not a good sign for the bulls.
If the pattern unfolds the way it should, then the Nifty is likely to decline towards the potential target of 11,100 levels in the near term.
However, going forward, given the speed and the extent of fall, a small rebound cannot be ruled out up to 11,400 levels once again. For the entire bearish pattern to get negated, Nifty has to surpass the right shoulder’s peak of 11,603 levels.
The Bank Nifty is approaching the long-term 200-DEMA of 26,150 which is a crucial support for the index. In addition, our weekly chart analysis indicates that the Bank Nifty is approaching its falling trendline support zone which is placed at 26,280-26,300 zone.
If the index manages to hold above the same, then a meaningful bounce back cannot be ruled out even in the Bank Nifty.
Here is a list of stocks that could deliver up to 6-8% returns in the next 1 month:
Tech Mahindra Ltd: Buy| Target: Rs 832| Stop Loss: Rs 739| Returns 8%
The stock has broken out from its multi-year rounding bottom pattern seen on the weekly chart. Tech Mahindra has also sustained above the breakout zone for the third consecutive week which is a positive sign.
Other oscillators also indicate that the current momentum is likely to get extended further. We expect the stock to rally towards its potential target of Rs 832 in the medium-term.
TVS Motor Company Ltd: Buy| Target: Rs 649| Stop Loss: Rs 575| Returns 8.2%
The stock has been defying all the selling pressure in the recent past, in fact, it has been moving higher. In addition, it has also broken out from the consolidation phase and surpassed its long-term 200-DEMA which further accentuates our bullish stance on the stock.
JSW Steel Ltd: Buy| Target: Rs 442| Stop Loss: Rs 404.5| Returns 6%
The stock is in a solid uptrend and has also been maintaining its higher top higher bottom structure. In fact, the upswing is so strong that the stock doesn’t even breach below its short-term 5-DEMA which indicates every decline is being used as a buying opportunity.
We expect, JSW Steel to move higher towards its potential target of Rs442 in the medium term
Disclaimer: The author is a Senior Technical Analyst, IIFL. 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.