If we look at the ratio of BankNifty to Nifty then it is currently at 1.94 and formed a base at around 1.90 levels.
Nilesh Ramesh Jain
Bulls regained control after pausing in the previous week. The market remained extremely volatile where Nifty rebounded sharply after taking support near its long-term 200-DMA which is placed at 10,850 levels on the daily chart.
Nifty also continued to make a higher top and a higher bottom formation on the daily chart, which indicates that the recent low of 10,880 will act as crucial support whereas the immediate resistance of a previous swing is placed at 11,341.
Looking at weekly closing in the Nifty index, the overall set up looks positive and a decisive move beyond 11,350 levels will provide further momentum towards 11,400-11,500 levels in the coming weeks.
The broader market outperformed the benchmark index in the previous week and looking at the structure, the defensive trader needs to adopt a stock-specific approach.
The volatility index IndiaVIX fell by 7.5 percent to end at 22.38 and also making a lower top and lower bottom formation which is giving comforts to the bulls.
On the derivative front, the data is indicating a positive bias a huge amount of Put writing was seen at 11,000 and 11,100 strikes whereas the maximum open interest is placed at 11,000 strike, which holds the open interest of 29 lakh contracts and also likely to act as immediate support in the coming week.
A fresh Call writing was seen at 11,500 strike which also holds the maximum open interest followed by 11,300 strike. If Nifty breaks above 11,300 then we can expect some short-covering move towards 11,500 levels. So the overall option data indicates that bulls are having the upper hand and expect Nifty to oscillate in a broader range of 11,000 - 11,500 in the coming week.
BankNifty index continued its underperformance compared to Nifty for the second consecutive week. If we look at the ratio of BankNifty to Nifty, it is currently at 1.94 and formed a base at around 1.90 levels. So the risk and reward are in favour of longs and we may see BankNifty outperforming Nifty in the coming weeks.
Technically, the BankNifty index formed a triple bottom near 21,000 levels on the daily chart which will act as major support. The immediate resistance is placed at 22,500 followed by 23,200 which is upper of the rising channel and likely to act as a major hurdle.
Here is the list of three stocks which could return 8-10 percent in short term:
Berger Paints: Buy | Target: Rs 600 | Stop Loss: Rs 525 | Upside: 8 percent
The stock formed a big bullish candle and also provided a breakout from a symmetrical triangle formation on the weekly scale. The momentum oscillator MACD has also provided fresh buy crossover on the daily as well as a weekly chart. The stock is also trading above its short term and long term moving averages. Looking at the overall setup, the stock is likely to breach its previous high of Rs 586 and move towards the unchartered territory.
Apollo Hospitals Enterprises: Buy | Target: Rs 1,900 | Stop Loss: Rs 1,680 | Upside: 8.5 percent
The stock is making a higher top and higher bottom formation on the daily chart. The volumes were higher than average on the weekly scale which also supports the price action. The weekly MACD is still in buy mode and RSI is making a higher top and higher bottom formation which hints of a further positive momentum in the counter.
Sterlite Technologies: Buy | Target: Rs 138 | Stop Loss: Rs 118 | Upside: 10 percent
After falling for two consecutive weeks the counter has formed a Hammer candlestick pattern on the weekly scale which is considered as a bullish reversal pattern. The stock is also taking the support of a rising trend line on the daily chart. The momentum indicators and oscillators are very well in the buy mode on the weekly scale.
The author is Derivative and Technical Analyst at Anand Rathi Shares and Stock Brokers.
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