Buy these two stocks for medium-term gains while Nifty remains in downtrend

The 20 day SMA also continues to trade below the 50 day SMA, indicating a negative moving average crossover. Weekly momentum readings like the 14-week RSI are in decline mode. 

Nifty
A larger correction is likely once the 16782 support is broken.

By Subash Gangadharan

Over the last few weeks, the Nifty has been in correction mode. The downtrend was confirmed when the support of 17613 was broken. On the daily chart, we see that Nifty remains in a downtrend despite the bounces seen recently. The index continues to make lower tops and lower bottoms for the last few weeks, barring the recent brief move above the swing high of 17490. The 20 day SMA also continues to trade below the 50 day SMA, indicating a negative moving average crossover. Weekly momentum readings like the 14-week RSI are in decline mode. 

While we remain open to pullback rallies, we expect the Nifty to eventually move lower in the coming sessions. A larger correction is likely once the 16782 support is broken. The current downtrend would however reverse if the Nifty manages to cross the recent swing high of 17640.

The below picks are for the next 15-26 trading sessions

Buy PI Industries

PIIND has shown relative strength this week. While the Nifty index has shed 1.72%  this week, PIIND has gained a healthy 5.47% over the same time period. In the process, the stock has also broken out of its recent trading range on the back of healthy volumes.

Technical indicators are giving positive signals as the stock trades above the 20 day and 50 day SMA. Daily momentum indicators like the 14-day RSI too have bounced back and are in rising mode now, which augurs well for the uptrend to continue.

With the intermediate technical setup looking positive, we believe the stock has the potential to move higher and take out its previous intermediate highs in the coming weeks and therefore recommend a buy between the 3060-3090 levels. CMP is 3075. Stop-loss is at 2900 while targets are at 3500.

Buy Sun Pharma

Sun Pharma is in an intermediate uptrend as it continues to make higher tops and higher bottoms over the last several months. After correcting recently and finding support at the 733 levels, the stock bounced back this week on the back of decent volumes.

Technical indicators are giving positive signals as the stock trades above the 20 day SMA and 200 day EMA. Daily momentum indicators like the 14-day RSI too have bounced back and are in rising mode now, which augurs well for the uptrend to continue.

With the intermediate technical setup looking positive, we believe the stock has the potential to move higher in the coming weeks and therefore recommend a buy between the 770-780 levels. CMP is 777. Stop-loss is at 743 while targets are at 850.

(Subash Gangadharan is a Senior Technical and Derivative Analyst at HDFC securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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