Bears in control: Charts suggest these two stocks can still help investors despite weak markets

March 11, 2020 5:29 PM

After falling sharply in the last two weeks and negative weekly closings for the last three weeks, this week too began on a negative note as the Nifty opened on Monday with a gap down. In the process, the Nifty moved below the crucial supports of 10670-10637.

With the Nifty having broken the crucial supports of 10670-10637 on Monday, we expect the index to move down further towards the next major supports at 10004-9958 in the coming week.
  • By Subash Gangadharan

After falling sharply in the last two weeks and negative weekly closings for the last three weeks, this week too began on a negative note as the Nifty opened on Monday with a gap down. In the process, the Nifty moved below the crucial supports of 10670-10637.

Technical indicators too are giving weak signals. The Nifty trades below the 13-day and 50-day SMA. The 13-day SMA is also below its 50-day SMA and both these moving averages are sloping down, suggesting potential for more downsides.

The 14-day and 14-week RSIs too are in decline mode and making new lows, suggesting a weakening of momentum. The fact that these indicators are making new lows suggests that they have not given any positive divergences. This implies that there are no signs yet of a reversal of the current downtrend.

With the Nifty having broken the crucial supports of 10670-10637 on Monday, we expect the index to move down further towards the next major supports at 10004-9958 in the coming week. Any pullback rallies could find resistances at 10751-10827.

1. Buy Godrej CP (Rs.607.4)

Target: 690

Stop Loss: 600

Godrej CP is one of the strongest stocks in the market at the moment. While the main indices have been crashing, this stock has quietly bounced back from its supports of 556-573 last week. It has thereby made a double bottom pattern on the weekly charts.

Technical indicators too are giving positive signals as the stock recently moved above its 13 day SMA and the 14-day RSI has bounced back smartly from oversold levels.

The short term uptrend is likely to continue if the stock can take out its recent highs of 630.

With the weakness seen in the broad markets, we therefore recommend buying Godrej CP only if it crosses the highs of 630. Targets are at 690, while stop loss is at 600.

2. Buy Reliance Industries (Rs.1154)

Target: 1280

Stop Loss: 1095

Reliance has corrected sharply from the highs of 1618 in the last few months. The stock is now trading near the major supports of 1086. These supports were tested and held in 2019, thereby making it a strong intermediate support.

With the long term technical set up looking healthy for Reliance, we expect these supports to hold and the stock to gradually reverse its recent downtrend and move higher.

 

However, with the weakness seen in the broad markets, we, therefore, recommend buying Reliance only if it crosses this week’s highs of 1241. Targets are at 1280, while stop loss is at 1095.

  • Subash Gangadharan is a Technical & Derivatives Analyst at HDFC Securities. Views expressed are the author’s own.

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