Expect another downside once pullback is over, buy these 3 stocks for short term

Nilesh Ramesh Jain

Nifty continued its winning streak for the second consecutive week and also continued to make a higher top and higher bottom formation on the daily chart.

If we take the retracement of the entire fall from the highs of 12,150 to the low of 7,511 then 38.2 percent retracement is coming around 9,315, which has been achieved successfully on Friday. Now, if Nifty manages to sustain above 9,300 levels then we can expect further momentum to continue towards 9,865 as well which is 50 percent retracement level of the entire fall.

The momentum indicator RSI is making a higher top and higher bottom formation and currently at 50.65 levels which hints of some positive momentum to continue.

Now, the immediate support is at 8,800 followed by 8,600, resistance is at 9,300 followed by 9,500.

The broader trend for Nifty continues to remain negative as long as it trades below 10,000 and currently, we are witnessing a ripple effect of a global market rally in Indian equities, too. So we can expect another leg on the downside once this pullback gets over.

The Volatility index (India VIX) fell for the third consecutive week and ended below 45 which is giving comfort to the bulls.

On the derivative front, the maximum open interest on the Put side is shifted to 9,000 strike on monthly as well weekly expiry. Maximum open interest on the call side is placed at 9,500 followed by 10,000 strike. The data indicates a trading range of 9,000-9,500 for the next week.

Bank Nifty has provided breakout from a symmetrical triangle pattern on the daily chart and now it is likely to move towards 21,500 and then 22,000 levels. The immediate support is pegged at 19,700 and below that, it may drift to 19,200 levels.

Here is the list of three stocks which could return 8-10.5 percent in short term:

Ramco Cements: Buy | Target: Rs 600 | Stop loss: Rs 520 | Return: 10.5 percent

The stock has provided breakout fresh from its double bottom pattern on the daily chart. The weekly chart stock has formed a big bullish candle with higher than average volume which also supports the positive move. The momentum oscillator MACD has also given buy crossover, which hints of positive momentum to continue.

Kotak Mahindra Bank: Buy | Target: Rs 1,270 | Stop loss: Rs 1,150 | Return: 7 percent

The stock has formed a Dragonfly Doji candlestick pattern on the daily chart which is considered as a reversal pattern. The stock formed a symmetrical triangle pattern, where a breakout is placed at 1270. The momentum indicator and oscillators are well in buy mode.

Bajaj Finserv: Buy | Target: Rs 5,400 | Stop loss: Rs 4,800 | Return: 8 percent

The stock after forming base it has provided breakout from a symmetrical triangle pattern on the daily chart. The stock has also formed a breakaway gap on the daily chart, which hints of positive momentum to continue.

The author is Derivative and Technical Analyst at Anand Rathi.