Hot Stocks | Muthoot Finance and BSE among short-term trading ideas

The October series started with a bang for the benchmark index with a rally of almost 500 points which closed the index above its 100 – day exponential moving average on the daily interval.

On September 30, Nifty50 remained volatile throughout the day and formed a long leg Doji candlestick pattern and closed within the range of the previous day’s candle.

Currently, Nifty is trading in a very narrow range of 50 and 21-day EMA which is placed at 11,170 and 11,290, respectively, on a daily timeline.

Currently, Nifty is in the second leg of lower high lower low formation. The first up leg got sold near 61.80 percent retracement from its previous intermediate high of 11,794 to its intermediate low of 11,185.15 levels.

For two consecutive days, the index is capped under the 11,300 level which is also a 61.80 percent retracement of the immediate high of 11,618 to the immediate low of 10,790.20 levels.

In case the index slips below the upper band of the recent positive gap, which is placed near 11,080 levels, a near-term corrective move cannot be ruled out.

On the lower side, the benchmark index will find strong support around the 10,800-mark, which is supported by a 100-day EMA on a weekly interval.

However, a stable move above its 61.80 retracements, placed at 11,300-11,350 level, will bring back the exuberance of climbing higher levels back in the trade.

Bank Nifty is underperforming the broader market, trading in lower high lower low formation.

It has closed below its 50 and 21 –day exponential moving averages on a daily scale. The RSI (14) is also quoting below 50 levels.

Going forward, the major support zone for Bank Nifty will be near 20,600–20,500 levels and the upside is likely to be capped near 22,000-22,150 levels.

Here are two buy and one sell call for the next 2-3 weeks:

Muthoot Finance | Buy | LTP: Rs 1,129 | Target price: Rs 1,230 | Stop loss: Rs 1,075 | Upside: 9%

On September 29, the stock prices finally managed to surpass the multiple resistance zones around Rs 1,100 –1,110 levels, which eventually confirmed a falling wedge pattern breakout on the daily interval.

The recent leg of strong up-move is also supported by strong volumes and it also resembles a strong consolidation breakout.

Prices are trading above 50 and 100-day EMA on the weekly chart. The momentum oscillator RSI (14) is reading near 55 levels with positive crossover, which is positive for the counter.

The MACD indicator is in positive crossover below the line of polarity which can be considered as an early trend reversal signal.

Traders can accumulate the stock in the range of Rs 1,130 - 1,135.

BSE | Buy | LTP: Rs 543.50 | Target price: Rs 590 | Stop loss: Rs 510 | Upside: 9%

After a multi-year prolonged downtrend, BSE has given a breakout of its “Falling Channel Pattern” on a weekly timeframe.

The stock has been steadily moving higher since March lows and has already given decent returns.

The strong reversal in momentum oscillator RSI (14) from 30 levels has set up a V-shape reversal and is currently reading near 60 levels with positive crossover on the weekly interval.

By observing relative strength (RS) on the weekly horizon, one can observe that the stock has been outperforming the benchmark index since June 20.

Traders can accumulate the stock in the range of Rs 543 -547.

Kotak Mahindra Bank | Sell | LTP: Rs 1,266.70 | Target price: Rs 1,190 | Stop loss: Rs 1,315 | Downside: 6%

For the last week, Kotak Mahindra Bank has been trading below its trendline resistance on the daily interval.

Since the breakdown, the counter has been trading below its short and medium-term (21 and 50) exponential moving averages which is negative for the prices.

Bank Nifty has been underperforming Nifty for the last couple of weeks. The MACD indicator has also hinted at losing upward momentum by closing below its line of polarity with negative crossover on a daily interval.

Traders can short the stock in the range of Rs 1,265-1,272.

(The author is a technical analyst at Bonanza Portfolio)