The short term trend of Nifty continues to be range bound. If Nifty fails to show a sustainable upmove above the immediate hurdle of 11300 levels in the next couple of sessions, then there is a possibility of weakness emerging from the highs.
By Nagaraj Shetti
The range bound action with volatility continued in the market for the second consecutive session on Wednesday and Nifty closed the day higher by 25 points. A small positive candle was formed with minor upper and lower shadow, which indicates a formation of high wave type candle pattern. Normally, a formation of such high wave type candle pattern after a reasonable upmove or decline could be considered as a reversal signal. Having formed this pattern in sideways range move doesn’t show any significant predictive value.
Nifty is currently placed at the hurdle of up trend line as per the concept of change in polarity around 11250 levels and the market is struggling to sustain above this hurdle in the last two sessions. The overall market breadth was not in favor of bulls on Wednesday, as the broad market indices like mid and small cap segments have ended with minor loss.
After the sharp upmove of 25th and 28th Sept, Nifty shifting into a sideways range movement could apparently be seen as a breather action before further upside. But, the overall Nifty is in a negative pattern like lower tops and bottoms and the significant reversal pattern like bearish engulfing is intact at the swing high of 11794.
Hence, considering this broader negative formation, Nifty showing any sharp upside bounce from here could be a difficult task, but there is a higher possibility of a resumption of sharp weakness from the highs in the near term.
The short term trend of Nifty continues to be range bound. If Nifty fails to show a sustainable upmove above the immediate hurdle of 11300 levels in the next couple of sessions, then there is a possibility of weakness emerging from the highs. Immediate support is placed at 11180 and the downside momentum is expected to pick up below this area.
Buy Avenue Super Marts Ltd (DMART) – (CMP Rs 2183.20)
The sharp down trend of this super market stock (DMART) of the last few weeks seems to have completed. The stock price has witnessed a sharp upside bounce in this week and closed higher. We observe a formation of consistent higher bottoms over the last few months, which signal strength of an intermediate uptrend. The recent swing low of Rs 1995 of last week could now be considered as a new higher bottom of the sequence. The last week’s candle pattern of bullish hammer could indicate a possibility of near term bottom reversal in the stock price.
Buying can be initiated in DMART at CMP (2183.20), add more on dips down to Rs 2105, wait for the upside target of Rs 2355 in the next 3-4 weeks. Place a stoploss of Rs 2060.
Buy Godrej Industries Ltd – (CMP Rs 413.90)
The stock price has been moving in a larger degree of higher highs and lows in the last few months, as per weekly timeframe chart. After the downward correction of the last one month, the stock price sustained above the support 20 period EMA of around Rs 380. The recent formation of higher bottom at the moving average support could signal a possibility of further upside in the coming sessions. Weekly 14 period RSI shows positive indication.
Buying can be initiated in Godrej Ind Ltd at CMP (413.90), add more on dips down to Rs 398, wait for the upside target of Rs 452 in the next 3-4 weeks. Place a stoploss of Rs 387.
(Nagaraj Shetti is a Technical Research Analyst at HDFC Securities. The views expressed are the author’s own. Please consult your investment advisor before investing.)