#39;Close above 12,320 favours bulls; prefer PFC, IRB Infra and Equitas Holdings#39;
Nifty faced strong resistance from the upper Bollinger Band line and traded lower through the week.
Index partially filled a gap standing in between 12,045-12,132 range which was formed on January 9 suggesting strong base near 12,050/12,000 zone and continuation of MACD buy signal is still supportive of bullish price action further.
Occurrences of Tweezer bottom candlestick pattern near 50 DMA has a bullish connotation for the near term. However, any trend reversal in favour of the bulls can be expected only on a close above 12,320 levels from where the index can extend its gain towards 12,400-12,500 levels whereas a day’s closing below 12,085 level can resume the weakness which can push prices towards parity line placed around 11,900 levels.
Once Nifty surpasses 12,430 resistance zones, it can march towards 12,500 and subsequently towards 12,600 levels which are near the Fibonacci extension line.
Near term, supports are placed near 12,100 where 50 DMA is seen and any daily close below these levels will lead to weakness in the Benchmark Index.
Bank Nifty continued its losing streak for fourth consecutive week and closed below previous week’s low indicating bearish bias in the price movement.
At the same time, the banking index gave a strong recovery after taking support from 20 WMA standing around 30600 levels, suggesting bulls are active in 30,800-30,600 zone.
IRB Infrastructure Developers | Rating: Buy around Rs 108 | Target: Rs 137 | Stop Loss: Rs 96 | Upside: 26 percent
The stock has formed a flag continuation pattern on the daily chart, which should resolve on the upside after its brief consolidation.
The momentum oscillator RSI is in positive territory and is entering into a trending phase. It is currently trading at a 10-week high indicating buying interest in the stock.
The MACD too indicates good momentum-trend follow through. We recommend a buy-in IRB around Rs 108 with a stop loss of Rs 96 and a target price of Rs 137.
Equitas Holdings | Rating: Buy around: Rs 108 | Target: Rs 128 | Stop Loss: Rs 99 | Upside: 18 percent
The momentum indicator MACD has crossed the signal line indicating a start of a trend. The RSI too is above its key 50 mark indicating positive momentum on its side. The stock is breaking out of a flag pattern with the weekly candle a bullish engulfing one, all indicating to further bullishness going forward.
The crucial resistance of the 20 SMA, 50 SMA, and 100 SMA has been recently taken off which indicated short term momentum has reversed into an uptrend. We recommend a buy in Equitas around Rs 108 with a stop loss of Rs 99 and aim for a target of Rs 128.
Power Finance Corporation | Rating: Buy around: Rs 114 | Target: Rs 130 | Stop Loss: Rs 104 | Upside: 14 percent
The stock witnessed sustained sell-off over the past few days, however, the strong demand zone around Rs 103-104 levels which has emerged as the support for the same.
On weekly chart, the stock has seen V-shape recovery along with which the stock has consistently seen an increase in volume indicating strong buying.
We expect the stock can perform going ahead and recommend buying in stock around Rs 114 with a stop loss of Rs 104 for the target of Rs 130.
(The Author is Head of Technical Research at Narnolia Financial Advisors.)
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