After rising from a low of 7511 touched in late March 2020, the Nifty has been consistently rising and making higher tops and higher bottoms within a rising wedge pattern.
By Subash Gangadharan
After rising from a low of 7511 touched in late March 2020, the Nifty has been consistently rising and making higher tops and higher bottoms within a rising wedge pattern. The Nifty is now currently trading near the key resistance of 9660. Given that the Nifty is in an intermediate downtrend, the odds seem more of a breakdown of the current rising wedge pattern. The reversal of this current short term uptrend would be confirmed on a close below the recent lows of 9141. A reversal is likely to lead to the Nifty resuming its intermediate downtrend and testing the next major supports of 8821 and 8055.
However, even if the Nifty manages to break out of the current trading range and move higher, we do not expect any major rally as there are stiff resistance at higher levels, which could halt the bulls. The 50 day SMA is currently at 9882 and is likely to act as a resistance in case the Nifty breaks out of the current narrow trading range.
Buy GAIL (CMP is Rs.89.1)
Stop Loss: 83
After falling sharply for several weeks and testing the major long term supports of 65, GAIL has bounced back smartly and made a double bottom pattern on the daily charts. The stock has then gradually moved higher and made a higher bottom at 78.7. Today, the stock broke out of the 78.7-88.7 narrow trading range on the back of healthy volumes indicating that the stock is ready to continue the next leg of the underlying uptrend.
Technical indicators too are giving positive signals as the 20 minute MA is currently above the 50 minute MA on the 15-minute intraday charts. This is a positive signal for the near term at least. The 14-day RSI too is in rising mode.
We, therefore, recommend buying GAIL between 86 and 89.2. Targets are at 101, while stop loss is at 83.
Buy ICICI Pru Life (Rs.402.4)
Stop Loss: 372
ICICI Pru Life has shown a lot of relative strength of late as it has rallied almost 20% this week. After rising from a low of 226, the stock has consistently made higher tops and higher bottoms. Today, the stock moved above the 317-390 trading range and also closed above the 50-day SMA, which is a sign of strength.
Momentum technical indicators too are giving positive signals as the 14-day RSI is in rising mode. We, therefore, recommend buying ICICI Pru Life between 390 and 405. Targets are at 480, while stop loss is at 372.
(Subash Gangadharan is a Technical & Derivatives Analyst at HDFC Securities. Views expressed are the author’s own)