The Nifty continued its upward journey for the second day in a row on Monday on the back of strength in the banking and financial services, auto and oil and gas stocks.
Since the last several days, the Nifty has been passing through a choppy trend, where finding a trending move has become difficult. On the higher levels around 17,400 supply emerges while at lower levels around 16,900, Nifty finds support. Previous swing high for Nifty is placed at 17,428, which also happens to be 50 percent retracement of the entire downswing seen from 18,096 to 16,747. Any level above 17,428, would result in to higher top formation preceded by higher bottom at 16,950.
The Nifty is holding above its long-term support derived from 200 days EMA (exponential moving average), which is placed at 16,900 odd levels. The 50 days EMA has been holding above its 200 days EMA, which indicates long term bullish trend for the benchmark index.
On surpassing of 17,428 resistance, the Nifty would confirm the directional move on the upside towards 18,000 levels.
To conclude, we believe that breakout from the range 16,900-17,428 would lead to directional move in the Nifty.
Traders are advised to hold longs with 16,900 stop-loss in Nifty on closing basis. A close above 17,428 level would be considered fresh breakout and Nifty could move towards next resistance levels of 17,722 and 18,000.
Here are three buy calls for the next 3-4 weeks:
Indian Bank: Buy | LTP: Rs 204.45 | Stop-Loss: Rs 188 | Target: Rs 235 | Return: 15 percent
The stock price has broken out from the symmetrical triangle on the daily chart with higher volumes. Primary trend of the stock is positive as it is trading above its 50, 100 and 200 days EMA.
Momentum Oscillators – RSI (relative strength index 11) and MFI (money flow index 10) are placed above 60 and sloping upwards on the weekly chart, indicating strength in the current uptrend of the stock. One can buy the stock in the range of Rs 204-195.
EIH: Buy | LTP: Rs 184.5 | Stop-Loss: Rs 170 | Target: Rs 213 | Return: 15 percent
The stock price has broken out from the symmetrical triangle on the weekly chart with higher volumes. Stock price is consolidating since last six weeks.
Primary trend of the stock is positive as it is trading above its 50, 100 and 200 days EMA. We expect stock price to end consolidation and resume its uptrend in the days to come. One can buy the stock in the range of Rs 185-180.
Bank of Maharashtra: Buy | LTP: Rs 18.85 | Stop-Loss: Rs 17.5 | Target: Rs 22 | Return: 16 percent
The stock price has broken out from the downward sloping trendline on the daily chart with higher volumes. Stock price has been taking support at 200 days EMA since last few days.
Plus DI is trading above minus DI while ADX (average directional index) line has started sloping upwards, indicating stock price is likely to gather momentum in the coming days.
PSU bank as a sector looks good on the short term chart. One can buy the stock in the range of Rs 18.95-18.5.
