By Nagaraj Shetti
After showing consolidation on Tuesday, Nifty witnessed a sustained rally on Wednesday and closed the day 135 points higher. A lasting upward movement emerged in the market until the afternoon, before showing another round of consolidation movement at the highs. A long positive candle formed on the daily chart on Wednesday with upper lower and lower shadow. Technically, this pattern indicates a bullish rebound in the market after a session of strong weakness on Monday. Crucial overhead resistance of 14,880 levels (resistance depending on polarity change) entered the scene on Wednesday, as Nifty retested the obstacle forming the day high at 14,879, before showing weakness minor peaks.
Previously, on three occasions, the Nifty has witnessed a sharp downward reversal from near this resistance zone (14,880) in subsequent sessions, having closed at the edge of this area in previous sessions. The Nifty closed again on the edge of this hurdle on Wednesday (peaked at 14,879) and there is a chance that Nifty will turn down from the highs as has happened in the past. But a sustained move above 14,900 levels could rekindle a strong bullish momentum. Forming a wider range move with a bearish day just below the hurdle and a formation of constant higher lows in the last three daily candles could signal a bullish view of the market for the near term.
Nifty’s short term trend is positive with beach linked action. The market is now placed near the “make or break” – a crucial 14,900 level area. The short term chart pattern indicates minor intraday weakness or a consolidation move around 14,880 levels before showing a lasting upside breakout in the short term. Immediate support is placed at 14,730.
Choice of actions:
Buy KOLTEPATIL (CMP Rs 243)
The weekly timeline chart for this real estate stock – Kolte Patil Developers Ltd shows a sustained upward rebound, which started from last week. After showing a false downward breakout of the weekly range below Rs 240 in mid-March, the share price saw a sustained upward rebound over the next two weeks. This false downside breakout could signify short-term upside chances. The greater degree of higher highs and higher bottoms is intact and the recent low of Rs 212 in mid-March could be seen as a new higher low in the streak. The weekly period 14 RSI is attempting to break above 60. This could mean further strengthening of the upward momentum in the share price.
The buy can be initiated in KOLTEPATIL at CMP of Rs 243, add more on declines to Rs 232, expect the target to rise to Rs 268 in the next 3-4 weeks. Place a stoploss of Rs 225.
Buy UNIONBANK (CMP Rs 36.85)
The strong downtrend in this PSU (Union Bank) bank share appears to be over, as the share price has experienced a sustained upward rebound in recent sessions. The stock price saw an upward rebound near the crucial support area of the 10 and 20 period weekly EMA and trendline support under the concept of polarity shifting around Rs levels. 34-35.
We are seeing higher funds forming on the weekly chart and the recent swing low of Rs 33.30 in mid-March could be seen as a new higher low in the streak. We can therefore expect a further increase in the short term. The 14-period weekly RSI shows a positive indication and volume has started to rise as the share price rises.
The purchase can be initiated in UNIONBANK at CMP of Rs 36.85, add more on declines to Rs 35, expect the target to rise to Rs 40.50 in the next 3-4 weeks. Place a stoploss of Rs 33.75.
(Nagaraj Shetti is Technical Research Analyst at HDFC. The views expressed are those of the author. Please consult your financial advisor before investing.)