Buy these two stocks to pocket near-term gains even as Nifty continues to show weakness

Updated: Oct 29, 2020 8:56 AM

We expect the Nifty to gradually move lower towards the next major support of 11537 in the near term. This is a crucial support as it corresponds to the 50-day SMA.

US Stocks, S&P 500, Russell 2000 Index, small caps, all-time highs, Nasdaq 100Both the S&P 500 and the Russell 2000 Index of small caps rallied to all-time highs.

By Subash Gangadharan

After surging higher last week, the Nifty began correcting this week from a high of 11943. Although the week saw sharp bounce backs, the selling has been more dominant as the Nifty has now made lower tops and lost so far this week.

The Nifty index has also closed below the 20-day SMA, which can be considered a weak signal. Momentum is also weakening as the 14-day RSI is now in decline mode and below its 9-day EMA.

We expect the Nifty to gradually move lower towards the next major support of 11537 in the near term. This is a crucial support as it corresponds to the 50-day SMA. Any pullback rallies could find resistance at 11861.

Buy Brigade Enterprises

Brigade has shown a lot of relative strength this week. While the Nifty has lost 1.71%, Brigade  has gained 2.57% over the same time period.

The stock has been steadily climbing higher in the last two weeks making higher tops and higher bottoms in the process. On Wednesday, the stock broke out of its recent narrow trading range.

Technical indicators are giving positive signals as the stock trades above the 20-day and 50-day SMA. Momentum readings like the 14-day RSI too are in rising mode and not overbought.

We believe the stock is ready to continue the next leg of its underlying uptrend and has the potential to move higher in the coming weeks. We therefore recommend a Buy between the 176-181 levels. CMP is 179.5. Stop loss is at 170 while targets are at 200.

Buy UPL

UPL has bounced back strongly from the supports of 429 in the last few sessions. These levels also provided support to the stock in July 2020, thereby making it a strong support.

The stock has now made a higher bottom on the 15 min intra day chart, indicating an uptrend is in progress. With momentum readings like the 14-day RSI bouncing back from oversold levels, this augurs well for the uptrend to continue.

We therefore recommend buying UPL between 447-452. CMP is 450.5. Stop loss is at 440, while targets are at 476.

(Subash Gangadharan is a Senior Technical and Derivative Analyst at HDFC Securities. The views expressed are the author’s own. Please consult you investment advisor before investing.)

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