Nandish Shah, Senior Derivative & Technical Analyst, HDFC Securities
Nifty plunged 285 points on Monday amid Omicron fears to close at 16,912 levels – its lowest closing since August 27. Short-term trend of the Nifty remains weak as it shows a ‘lower top lower bottom’ formation on the daily chart. The Nifty is also trading below its all-important short-term moving averages.
In the derivatives, we have seen aggressive Call writing at 17,000-17,300 levels. Moreover, falling 10-day EMA (exponential moving average) is currently placed at 17,250 levels. Therefore, unless it closes above the 17,250 level, the short-term trend will remain bearish.
The Nifty made an intraday low of 16,782 levels on November 29 and bounced back. This level coincides with the previous top resistance of 16,700, which will interchange its role as a support. Therefore, we believe that on the lower side, 16,700-16,800 level will act as an immediate support.
After running correction of 15 percent from a high made in October, the Nifty Smallcap Index formed a bullish hammer pattern on the weekly chart (December 3). The average fall of the Nifty500 stock is 21 percent from their 2021 highs, while many stocks are down by more than 30 percent. The Midcap/Smallcap space has outperformed as year-to-date Nifty Midcap Index is up 43 percent, Small cap Index is up 51 percent, while Nifty is up 21 percent. We expect Mid/Smallcaps stocks to continue their outperformance for the coming months.
To Sum It up, we believe that the short-term trend of the Nifty is weak. Therefore, our advice is to remain cautious till it closes above the 17,250 levels. On the lower side, we expect the benchmark to find an immediate support in the vicinity of 16,700-16,800. Further support for the Nifty is seen around 16,200 levels where 200-day EMA is placed.
Here are two buy and one sell recommendations for the next 2-3 weeks:
Lincoln Pharmaceuticals: Buy | LTP: Rs 354 | Stop Loss: Rs 334 | Target: Rs 390 | Return: 10 percent
The stock price has broken out on the daily chart from the downward sloping trendline, adjoining the highs of September 30, 2021 and November 12, 2021.
Daily RSI (relative strength index) and MFI (money flow index) lines are placed above 50 and sloping upwards, indicating strength in the current uptrend. Plus DI (Directional Indicator) line is placed above Minus DI while ADX (Average Directional Index) line is placed above 25 indicating momentum in the current uptrend.
Globus Spirits: Buy | LTP: Rs 1,232.90 | Stop Loss: Rs 1,150 | Target: Rs 1,380 | Return: 12 percent
The stock price has broken out on the daily chart with higher volumes to close at highest level since November 11. Primary trend is positive where stock price is trading above its important short and medium-term moving averages.
Daily RSI and MFI lines are placed above 50 and sloping upwards, indicating strength in the current uptrend.
Dalmia Bharat: Buy | LTP: Rs 1,793.80 | Stop Loss: Rs 1,900 | Target: Rs 1,610 | Return: 10 percent
The stock price has broken down on the daily chart with higher volumes. Short-term trend of the stock is weak as it is trading below its 5 and 20 day EMA (exponential moving average).
Daily RSI is sloping downwards and placed below 40, indicating weakness in the stock. Minus ADI line is placed above Plus ADI while ADX is placed above 25, indicating momentum in the current downtrend.
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