Nifty may have bottomed out, needs to hold above 16833; Buy these two stocks for gains

If the Nifty can hold above the recent swing low of 16833 on any corrections and bounce back strongly to take out the recent swing highs of 17286, then there is a good chance that the intermediate correction seen recently is over and markets have resumed a new uptrend.

Weekly momentum readings like the 14-week RSI are in decline mode.

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 the 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 50-day SMA, indicating a negative moving average crossover. Weekly momentum readings like the 14-week RSI are in decline mode. 

While the intermediate trend is still down, the short term trend is up as the Nifty has been consistently making higher tops and higher bottoms over the last few sessions on the 60-minute intraday charts. If the Nifty can hold above the recent swing low of 16833 on any corrections and bounce back strongly to take out the recent swing highs of 17286, then there is a good chance that the intermediate correction seen recently is over and markets have resumed a new uptrend.

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

Buy KNR Constructions

KNR Constructions has shown relative strength this week. While the Nifty index has gained 1.1% this week, KNR Constructions has gained a healthy 5.2% over the same time period. In the process, the stock has also broken out of its recent trading range on the back of above average 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. We therefore recommend a buy between the 297-303 levels. CMP is 300.8. Stop loss is at 282 while targets are at 340.

Buy Gujarat Narmada Valley Fertilizers & Chemicals

GNFC 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 390 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 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 in the coming weeks and therefore recommend a buy between the 445-455 levels. CMP is 450.6. Stop loss is at 415 while targets are at 525.

(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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