After the formation of a doji type pattern in the previous couple of sessions, Nifty slipped into weakness in the early part of Wednesday's session, but shifted into a sustainable upside recovery.
By Nagaraj Shetti
After the formation of a doji type pattern in the previous couple of sessions, Nifty slipped into weakness in the early part of Wednesday’s session, but shifted into a sustainable upside recovery for the better part and closed the day with an upside recovery note. Nifty closed the day lower by 14 points lower on Wednesday at 11308.40. A small body of positive candle was formed with minor lower shadow at the lows. Technically, this signal formation of high wave type pattern and this indicate that bulls are holding their defense. This choppy movement below the hurdle of previous swing high could eventually result in a retesting of recent swing highs (11373) or scale higher.
Present range bound action of the last 3-4 sessions could mean that there is a possibility of one more upside breakout attempt at 11375-11400 levels in the short term, before witnessing any reversal pattern at the highs. The broad market indices and banking sectors continue to outperform in the market.
The long term charts of Nifty like weekly and monthly shows presence of strong overhead resistance around 11400-11500 as per the concept of change in polarity. Hence, any upside breakout attempt above 11400 needs to be careful with regards to an important trend reversal.
The short term uptrend status remains intact, still there is no evidence of reversal pattern at the highs. Positional longs needs to be protected with stoploss of 11125. On the upside the area of 11400-11500 could act as a key overhead resistance in the near term.
State Bank of India: BUY- (CMP Rs 203.50)
The PSU banking stock was moving in a larger consolidation pattern over the last one month, as the stock price was moving in a triangle type pattern. On Wednesday, the stock price witnessed a sharp upside breakout of the consolidation and closed higher.
The weekly timeframe chart indicate a possibility of inverted head and shoulder formation with the neckline of Rs 199-200 levels, which is broken on Wednesday. A sustainable move above 202 could have a sharp positive impact on the stock price ahead.
Buying can be initiated in SBIN at CMP (203.50), add more on dips down to Rs 196, wait for the upside target of Rs 220 in the next 3-5 weeks. Place a stoploss of Rs 190.
Motherson Sumi Systems Ltd – (CMP Rs 116.50)
After showing a larger range movement in the last two months, the stock price has witnessed an excellent upside breakout of the consolidation of Rs 100 and closed higher in the last week. The last weeks pattern could also mean an upside breakout of the range movement and also a key overhead resistance as per the concept of change in polarity at Rs 111.
Volume expanded during upside breakout and daily/weekly 14 period RSI signal positive bias.
Buying can be initiated in Motherson Sumi at CMP (116.50), add more on dips down to Rs 110, wait for the upside target of Rs 130 in the next 3-5 weeks. Place a stoploss of Rs 106.
(Nagaraj Shetti is a Technical Research Analyst at HDFC Securities. The views expressed are the author’s own. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)