If the Nifty breaks above the 20-Day SMA (18,050), it can be assumed that profit booking and the correction have come to an end. The index may resume its upmove towards 18,400, 18,600 and eventually towards a fresh life time high
Karan Pai
November 08, 2021 / 07:13 AM IST
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The Nifty has been seeing profit-booking for the past two weeks and formed a lower low, lower high pattern and moved lower towards the 17,600-mark. It seems to be holding the previous week low and has formed an inside candle.
On the daily charts, we see that the Nifty not only broke but also stayed below the 20-Day simple moving average (SMA). The 20-Day SMA is acting as a resistance and the prices seem to be witness profit-booking the moment the index gets closer to the 20-day SMA.
However, momentum indicators like the Relative Strength Index (RSI) can be seen forming a lower low, lower high pattern on the daily and the weekly time-frames, indicating that the bulls might be losing their hold on the index.
We believe, the 18,050,20-day SMA, is going to act as a strong resistance. We can expect the index to correct further and move towards 17,432 or move sideways as long as the prices are below 18,050.
If the index manages to shoot past the 20-day SMA, we can assume that the profit-booking and the correction have come to an end. The Nifty may then resume its up move towards 18,400 and 18,600 and eventually a fresh lifetime high.
Here are three buy calls for next three-four weeks:
Sobha: Buy | LTP: Rs 950.60 | Stop Loss: Rs 850 | Target: Rs 1,127 | Return: 18.6 percent
Sobha for the past couple of weeks was witnessing choppy moves. The stock was forming a higher high, higher low pattern since October 29.
This up move was also backed by good volume, indicating participation in the up move. On November 3, the stock tested a fresh 52-week high and managed to sustain at higher levels.
On the indicator front, the Bollinger bands on the daily charts can be seen expanding, indicating increasing volatility as the prices move higher.
As per the price pattern, we feel that the stock price is gaining momentum and moving higher toward a fresh 52-week high of Rs 1,050 and eventually towards Rs 1,127.
Investors can accumulate Sobha and hold with a target of Rs 1,050 and Rs 1,127 and maintain a stop loss of Rs 850 on a closing basis.
L&T: Buy | LTP: Rs 1,908.95 | Stop Loss: Rs 1,730 | Target: Rs 2,258 | Return: 18.3 percent
Larsen & Toubro, on the higher timeframe, can be seen drifting higher and testing a fresh 52-week high slowly but steadily.
The price can be seen riding the upper Bollinger bands on the weekly time frame. On the daily chart, we can see that the prices gained bullish momentum and moved higher after about two weeks of consolidation. This was backed by good volume build up, indicating participation in the up move.
The RSI seems to have witnessed a range shift and has been placed above the 50-mark for a long time. It can be seen moving towards the overbought level, indicating increasing bullish momentum in the price. We expect the stock to move higher towards Rs 2,056-2,258.
The stop loss for this trade setup would be Rs 1,730 on a closing basis.
Jammu & Kashmir Bank: Buy | LTP: Rs 45.25 | Stop Loss: Rs 38 | Target: Rs 53.35 | Return: 18 percent
On the medium to long-term charts, J&K Bank can be seen coming out of a prolonged consolidation. On the shorter timeframe charts, we can see prices forming a higher high, higher low pattern and moving higher with volume buildup, indicating participation in the upmove.
The RSI on the weekly charts can be seen placed above the 50-mark since May 2021. It can be seen moving higher towards the overbought level, indicating an increasing bullish momentum in prices.
We expect the bullish momentum to accelerate if the price goes higher than Rs 46.35, after which we may see the stock move towards Rs 53.35 followed by Rs 59.25.
The stop loss for this trade setup would be Rs 38 on a closing basis.
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