Further weakness likely if Nifty closes below 11,900; bet on 3 stocks for 12-17% return

Shabbir Kayyumi

After the heavy cuts on the Budget day, the market witnessed a V- shape recovery and formed big body bullish candlestick pattern near 200-DMA suggesting strong comeback by bulls. Although Nifty gave a close below popular moving averages 20-DMA, it is still trading above 50-DMA indicating bullish bias to continue further.

At the same time, increasing peaks of MACD histogram and sustainability of RSI in the bullish zone adds the conviction to buy on dip strategy.

Nevertheless, the short-term oscillators have again come back in the overbought zone, implying the possibility of retracement towards 12000-11900 as a part of cooling-off behavior.

Shabbir Kayyumi

Head of Technical & Derivative Research|Narnolia Financial Advisors

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Occurrences of long body bullish candlestick pattern after taking support from 200-DMA and a higher close above 61.8 percent Fibonacci retracement suggests uptrend to continue further and any correction can be considered as pullback buy whereas a day’s closing below 11,900 levels can resume the weakness which can push prices towards the line of parity placed around 11,800 levels and which can extend towards strong base placed around 11,600 further.

Bank Nifty continued its winning streak for the 4th consecutive week and closed above 20-DMA placed around 31,000 mark indicating bullish bias in the price movement. Since the majority of the oscillators are in the overbought zone, the possibility of retracement towards 38.2 percent of Fibonacci levels (30,700) cannot be ruled out.

Here is the list of stocks which could return 12-17 percent in short term:

Karnataka Bank: Buy Around Rs 73 | Target: Rs 86 | Stop Loss: Rs 65 | Upside: 17 percent

The stock has been an underperformer throughout 2019 and was trading in a sideways trend with the formation of the double bottom on the daily chart. However, for the past few weeks, supply is looking diminished due to the formation of a hammer at lower levels.

It has managed to defend 20 DMA and declining histogram in MACD on weekly chart suggests upside swing in the coming days. The positive divergence in RSI on the daily chart also suggests that prices may move further on the upside in the coming weeks. Hence, investor should accumulate the stock around Rs 73 with a stop loss of Rs 65 for the target of Rs 86.

Bank of Baroda: Buy Around Rs 90 | Target: Rs 105 | Stop Loss: Rs 83 | Upside: 16 percent

Bargain hunting is seen at lower levels in the scrip from where it formed a strong base. Currently, it has formed a double bottom on the weekly chart along with the formation of the hammer which suggests a reversal is round the corner. Indicators and oscillators also lending support to the price action. Traders can take an entry from the level of Rs 90, for the target of Rs 105 while keeping stop loss of Rs 83.

Coal India: Buy Around Rs 180 | Target: Rs 203 | Stop Loss: Rs 165 | Upside: 12 percent

Stock has bottomed out near support zone of Rs 171-173 and it has been consolidating for last few days on the daily chart. Emergence of green candles near the support line on the daily chart indicates upside movement in the coming sessions.

Daily momentum indicator RSI seems to be turning towards on northward side while forming positive divergence on the daily chart which is also creating a positive rhythm in the scrip. Furthermore, Bullish crossover in MACD adds the conviction of buying the scrip around Rs 180 for the target of Rs 203 with a stop-loss of Rs 165.

The author is Head of Technical Research at Narnolia Financial Advisors.