Nifty continued its downward journey for the third consecutive day as it fell 133 points to close at 14,239 on January 25, marking its lowest close since January 7.
It was October 2020 when Nifty had fallen for three consecutive sessions.
Last Thursday, Nifty made a ‘dark cloud cover’ bearish reversal pattern on the daily chart while it made a spinning top on the weekly chart.
This indicates that the bears dominated the bulls as the markets corrected and most of the gains were eroded during the latter part of last week.
Now, the intermediate uptrend has shifted downward.
RSI (14) has now breached 60 levels on the daily chart and is showing signs of negative divergence.
Nifty also closed below its 20-day EMA. This is the first time after November 2, 2020, that Nifty has closed below its 20-day EMA.
In the derivative segment, FIIs’ long to short ratio fell to 1.50 level from 4 levels indicating FIIs have started reducing their longs in the index futures segment.
Immediate support for Nifty is placed in the range of 14,100-14,200 where we have seen Put writing.
Any close below 14,100 would mean that the correction could accelerate and Nifty could attempt 13,770-13,865 levels.
If Nifty does not move above 14,500 on any pullback rally, the intermediate downtrend will remain intact.
For Bank Nifty, our advice is to remain bearish with a stop loss of 31,800 where 5 and 11-day EMA is placed.
On the lower side, immediate support is placed around 30,900 levels. Far support for Bank Nifty is placed around 30,000.
While the intermediate trend of the Nifty and Bank Nifty remains negative considering the upcoming Budget session, the possibility of huge volatility cannot be ruled out.
Moreover, considering ongoing result season, we believe that there will be a lot of stock-specific trading opportunities in the coming days.
Here are three buy recommendations for the next 3-4 weeks:
PNC Infratech | LTP: Rs 186.65 | Target price: Rs 210 | Stop loss: Rs 175 | Upside: 13%
The infra sector is looking good on the charts.
This stock broke out on the daily chart on January 8 where it closed at the highest level since February 2020.
For the last few days, the stock price has been witnessing sideways corrections which we believe is a good buying opportunity.
The short-term trend of the stock is bullish where the stock is trading above its 20-day EMA.
For the last four months, the stock price has been taking support at 200-day EMA.
JB Chemicals and Pharmaceuticals | LTP: Rs 1,045 | Target price: Rs 1,140 | Stop loss: Rs 1,000 | Upside: 9%
This stock has broken out on the daily chart with higher volumes where the stock price has closed at the highest levels since January 13, 2021.
The short and medium-term trend of the stock is bullish as the stock price is trading above all-important short and long-term moving averages. Oscillators like RSI and MFI, are indicating strength in the stock.
Mahindra Holidays & Resorts India | LTP: Rs 226.05 | Target price: Rs 245 | Stop loss: Rs 213 | Upside: 8%
The stock has broken out on the daily chart with higher volumes as it has closed at the highest level since February 2020.
The short and medium-term trend of the stock is bullish as the stock is trading above all-important short and long-term moving averages.
The stock is forming bullish higher top higher bottom formation on the daily chart. Oscillators and momentum indicators are indicating strength in the stocks.
(The author is a technical research analyst at HDFC Securities)