Nifty preparing for more downside? Two stocks to stay immune from the weakness ahead

Updated:May 06, 2020 5:37:00 pm

After witnessing sharp weakness on Monday, Nifty shifted into a mixed trend with range bound action in the last couple of sessions.

The last two session’s candle pattern also signals lack of strength in the downside momentum.
  • By Nagaraj Shetti

After witnessing sharp weakness on Monday, Nifty shifted into a mixed trend with range bound action in the last couple of sessions. A small positive candle was formed on Wednesday (small candle with upper and lower shadow-a high wave pattern). Technically, this could signal range bound action. The last two session’s candle pattern also signals lack of strength in the downside momentum.

The formation of bearish patterns like bearish island reversal, on May 4, and the false upside breakout of the rising wedge (converging trend line breakout) could signal weak outlook for the market ahead. The downside pattern target for bearish island reversal is at 8910 levels. 

Conclusion:

The short term trend of Nifty is slightly positive with range bound action. There is a possibility of minor upside bounce in the next 1-2 sessions, maximum up to 9450-9550 levels. 

Eventually, Nifty could fail to sustain the highs and one may expect higher levels of weakness soon in the market. The downside levels to be watched for the next week is at 8900 and lower. Hence, one may adopt sell on rise strategy in the market.

Stock Picks: 

The New India Assurance Co Ltd (NIACL): BUY- (CMP Rs 125.10) 

After showing sideways range movement in the last two weeks, the stock price witnessed an upside bounce recently and sustained with a minor gains on Wednesday. A sustainable move above 128-130 levels could indicate sharp upside breakout of the range movement. Volume has started to expand along with price rise and the daily/weekly RSI suggesting strengthening of upside momentum in the stock price.

Buying can be initiated in NIACL at CMP (125.10), add more on dips down to Rs 119, wait for the upside target of Rs 138 in the next 3-4 weeks. Place a stoploss of Rs 115.

SBI Life Insurance Co. Ltd – BUY – (CMP Rs 731.15) 

After witnessing a sharp upside bounce in the month of March-April -2020, the stock price has shifted into a broader range movement over the last couple of weeks. Currently, the stock price is making an attempt of upside breakout of range movement around Rs 750 levels. Weekly momentum oscillator signals positive outlook for the stock price ahead.

One may look to Buy SBI Life Insurance Co. Ltd at CMP (Rs 731.15), add more on dips around Rs 700, wait for the upside target of Rs 810 in the next 3-4 weeks. Place a stoploss of Rs 675.

(Nagaraj Shetti is a technical analyst at HDFC Securities. Views expressed are the author’s own. Financial Express Online does not responsible for the recommendations, please consult your advisor before investing.)

Live Blog

Highlights

    Next Stories
    1Indian oil refineries jumped in on cheap crude, now recovery seems some way off for virus-hit oil market
    2Leaders of next bull run: These three sectors to emerge winners post coronavirus | INTERVIEW
    3Nifty charts suggest high possibility of strong buying from lows; these 2 stocks likely to gain