Charts signal strong support for these two stocks; recent market correction may have bottomed out

Updated: December 24, 2020 8:14 AM

With the intermediate uptrend still intact, we expect the recent correction to be more of a short term nature and may have possibly bottomed out with the strong price action seen in the last two sessions.

Share Market Today, Share Market LiveCrucial supports to watch for a short term trend reversal are at 13864-13842.

By Subash Gangadharan

Markets have corrected sharply in the last one week. A sharp bounce back in the last two sessions has however curbed the losses. Broad market indices like the BSE Mid Cap and Small Cap indices too have bounced back from close to their 50-day SMAs indicating a possibility that the short term correction is over and markets are ready to resume their intermediate uptrend.

The Nifty, however, remains in a short term downtrend. This would reverse with a close above the recent highs of 13778. Immediate supports to watch for resumption of weakness are at 13432.

With the intermediate uptrend still intact, we expect the recent correction to be more of a short term nature and may have possibly bottomed out with the strong price action seen in the last two sessions. It is important that the recent lows of 13131 are not broken for the intermediate uptrend to sustain.

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

Buy Bharat Forge

After correcting from a high of 568 touched on 16th Dec 2020, Bharat Forge found support around the 492 levels yesterday. These levels also coincide with the 50 day SMA indicating that it is a strong support.

The stock rebounded strongly in the last two sessions and made a higher bottom on the 15-minute intraday chart. In the process, there has also been a moving average crossover as the 20 period MA has crossed above the 50 period MA on the 15 min intraday charts. This augurs well for the short term uptrend to continue. We, therefore, recommend a Buy between 530 and 540 with a SL at 510 and Target of 600. CMP is Rs.538.

Buy State Bank of India

SBI has corrected sharply from a high of 276 in the last two weeks. The stock found support at the 248.3 levels and has made a hammer pattern on the daily charts on 22nd Dec 2020.

On Friday, the stock closed above the 20 day SMA, indicating that the bulls are gaining control. Zooming into the 15 min intraday charts, we notice that the stock has moved higher in the last two trading sessions and made a higher bottom in the process. This augurs well for the bullishness to continue.

We, therefore, recommend a Buy between 260 and 263 with a SL at 255 and Target of 280. CMP is Rs.262.8.

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

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