Two stocks to buy for near-term gains; charts signal upside potential as Sensex, Nifty fall

January 7, 2021 9:05 AM

After showing consistent upmove over the last ten sessions, Nifty halted its upside momentum on Wednesday and shifted into a profit booking mode amidst a volatility

Nifty 50, Bata India, Ajanta PharmaA reasonable negative candle was formed with lower shadow on the daily chart, beside the positive candle of Tuesday

By Nagaraj Shetti

After showing consistent upmove over the last ten sessions, Nifty halted its upside momentum on Wednesday and shifted into a profit booking mode amidst a volatility and closed the day lower by 53 points.  After opening on a slightly positive note on Wednesday, the market has shifted into a range move with weak bias in the early to mid-part of the session. The weakness got intensified in the mid part on the volatile global cues and Nifty shifted into a firm upside recovery in the mid to later part of the session.

The overall market breadth was slightly down and the broad market indices like NSE midcap 100 has closed higher by 0.55% and smallcap 100 closed on a flat note.

A reasonable negative candle was formed with lower shadow on the daily chart, beside the positive candle of Tuesday. Technically, this pattern indicate minor profit booking at the new swing highs. Though, Nifty declined on Wednesday, the uptrend status of the market remains intact and there is no formation of any significant reversal pattern at the highs.

The Nifty has been sustaining above the immediate support of 10 period EMA for the last 50 sessions, except two days of high volatility (21st and 22nd Dec 20) as per daily timeframe chart. Presently, this moving average is offering support at 13970 levels and this area is going to be crucial for the short term trend reversal.

Conclusion: Wednesday’s decline with volatility could be a minor profit booking in the market at the new highs. The underlying short term uptrend remains intact and we are likely to see buying emerging in the coming sessions. Important lower supports to be watched at 13970 and the next upside resistance is at 14310.

Stock Picks:

Buy Bata India Ltd – (CMP Rs 1658.95)
After showing sideways range movement in the last few weeks, the stock price (Bata India Ltd) has witnessed upmove above the upper range at Rs 1620 levels on Wednesday and closed higher. This pattern could be considered as a crucial upside breakout of the range and this could have sharp positive impact on the stock price in near term. We observe positive chart pattern like higher highs and lows, which signal a strength of an uptrend. Volume and weekly RSI indicate further upside potential for the stock price ahead.

Buying can be initiated in Bata India Ltd at CMP (1658.95), add more on dips down to Rs 1600, wait for the upside target of Rs 1830 in the next 3-4 weeks. Place a stoploss of Rs 1570.

Buy Ajanta Pharma Ltd – (CMP Rs 1695)
The stock price has been moving in a larger consolidation pattern over the last few months. We observe a formation of symmetrical triangle pattern and the stock price is making attempt to break above this triangle pattern at Rs 1725 levels. Hence, a sustainable move above this area could open a sharp upside for the near term. Weekly 14 period RSI has sustained above 60 levels and the volume has started to expand during upmove in the stock price. This is positive indication and signal more upside in the coming weeks.

Buying can be initiated in Ajanta Pharma Ltd at CMP (1695), add more on dips down to Rs 1625, wait for the upside target of Rs 1875 in the next 3-4 weeks. Place a stoploss of Rs 1595.

(Nagaraj Shetti is a Technical Research Analyst at HDFC Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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