Nifty continued its upside momentum amidst a volatility on Wednesday and closed the day on a flat note. After opening on a slightly positive note, Nifty slipped into weakness in the early to mid-part of the session. A sharp upside recovery has emerged from intraday low in the afternoon to later part of the session and Nifty finally closed near the upper end of a range.
A small negative candle was formed on Wednesday with lower shadow, which signal a formation of hanging man type candle pattern. Normally, a formation of hanging man after a reasonable upmove are considered as a warning signal for reversal of trend post confirmation. But, having formed this pattern amidst a range movement, the immediate negative implication could be doubtful.
The negative pattern of bearish engulfing of daily time frame chart (November 25) and doji pattern of last week is still intact as long as the new high of 13150 is protected. A decisive/sustainable move above 13150 is expected to negate both the negative pattern and that could turn sentiment into further bullish.
The display of instability around 13150-13200 levels could mean an emergence of selling pressure at the highs and one big drop in the index can’t be ruled out from the new highs. One needs to be cautious at the highs.
The short term trend of Nifty continues to be positive with range bound action. The market is expected to face stiff resistance around 13150 or slight higher in the coming sessions. A sustainable move above this area could open some more upside for the market. A lack of strength to sustain around 13150 levels is expected to result in another one day sharp drop in the index from the highs. Immediate support is now at 12980.
Buy Indian Oil Corporation Ltd- (CMP Rs 88.35)
After the consolidation movement or minor decline in the last couple of weeks, the stock price (IOC) has shifted into an upmove on Wednesday. This upmove could be considered as an upside breakout of key overhead resistance, as per change in polarity around Rs 86. This action could also mean an upside breakout of rounding bottom type pattern. This is positive indication. Volume and weekly RSI are supporting further upside in the stock price.
Buying can be initiated in IOC Ltd at CMP (88.35), add more on dips down to Rs 85, wait for the upside target of Rs 97 in the next 3-4 weeks. Place a stoploss of Rs 82.50.
Buy CESC Ltd – (CMP Rs 605.90)
The weekly timeframe chart of CESC Ltd indicates a range movement in the stock price over the last one month. The stock price is currently moving in a larger channel pattern and is now placed near the lower end of a channel around Rs 570-600 levels. According to this channel pattern, the stock price is expected to break above the immediate resistance of Rs 608-610 levels and that could lead to an upside breakout towards the upper end of a channel around Rs 680 and more.
Buying can be initiated in CESC Ltd at CMP (605.90), add more on dips down to Rs 580, wait for the upside target of Rs 675 in the next 3-4 weeks. Place a stoploss of Rs 560.
(Nagaraj Shetti is a Technical Research Analyst at HDFC Securities. The views expressed are the author’s own. Please consult your investment advisor before investing.)