In the last two months, the market has been in a strong up trended move and the downward corrections in between was smaller and is limited up to 2-3 sessions.

By Nagaraj Shetti

After showing weakness from all-time highs on Tuesday, Nifty witnessed follow-through declines on Wednesday and closed the day lower by 152 points. A long bear candle was formed on the daily chart, which indicate sharp reversal in the market. The recent swing high of 18604 could now be considered as a short term top formation for the Nifty.

In the last two months, the market has been in a strong up trended move and the downward corrections in between was smaller and is limited up to 2-3 sessions. As per this pattern, the two sessions of weakness is already over from the highs and there is a possibility of an upside bounce emerging from the lows in the next 1-2 sessions.

The correlation of Nifty and 10 day EMA is intact as per daily timeframe chart. The last two session’s downward correction from the highs have narrowed the gap between Nifty and this moving average. As happened in the past for several times, the Nifty could slide down to the support of 10d EMA (currently at 18150) in the next 1-2 sessions before showing any sustainable upside bounce.

The short term trend of Nifty continues to be negative and there is a possibility of some more weakness in the next 1-2 sessions before showing any convincing upside bounce from the lows. Important lower support is placed around 18150-18100 levels.

Stock Picks: 

Buy Bharti Airtel Ltd- (CMP Rs 708.10) 

The stock price as per weekly timeframe chart was in a sharp up trended movement in the last couple of months. We observe positive chart pattern like higher tops and bottoms as per weekly timeframe chart. After a sideways range movement of the last two weeks, the stock price is now ready to show further upside. Weekly RSI and ADX/DMI are showing positive indication

Buying can be initiated in BHARTIARTL at CMP (708.10), add more on dips down to Rs 680, wait for the upside target of Rs 780 in the next 3-4 weeks. Place a stoploss of Rs 660.

Buy Mazagon Dock Shipbuilders Ltd – (CMP Rs 272.50) 

The stock price has been moving in a gradual upmove amidst range bound action as per weekly timeframe chart. Now placed to show upside breakout of the overhead resistance and also upside range at 275 levels. Hence, a sustainable move above this area could have a sharp positive impact on the stock price. Weekly RSI is above 60, which indicate chances of further strengthening of upside momentum.

Buying can be initiated in MAZDOCK at CMP (272.50), add more on dips down to Rs 262, wait for the upside target of Rs 300 in the next 3-4 weeks. Place a stoploss of Rs 254.

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