Nifty50 saw a V-shape reversal rally from 11,200 and filled the gap created on September 4, 2020.
In the previous week, the benchmark index had formed a bullish hammer candlestick pattern near its upward rising trendline support which is likely to act as an initial anchor point for the index.
On September 16, Nifty, on a smaller timeframe (60 mins) witnessed an inverted head and shoulder pattern breakout around 11,570.
The index successfully closed above its neckline support and is well poised for some short-term gains which can be visible on an intraday chart.
In the past couple of days, Nifty managed to close above 11,000 mark which is further supported by a positive market breadth.
The index is trading above all its crucial short-term exponential moving averages (21 & 50) which is positive for the near-term.
On the derivatives front, put writing at 11,500-11,300 strike prices indicates Nifty is likely to find strong support in the range of 11,200-11,300.
Unless Nifty closes below it, the trend would be considered bullish for the market from the derivatives side also.
As we mentioned in the previous week's update, Nifty has formed a bearish Bat Harmonic pattern and it will be neglected only above 11,900 levels.
In case Nifty penetrates below 11,200 and sustains for a couple of days on a closing basis, further supply until 11,000-10,900 cannot be ruled out.
Any big move on the higher side should be expected only above 11,900 levels.
Here are two buy and one sell call for the next 2-3 weeks:
LIC Housing Finance | Buy | LTP: Rs 308.90 | Target price: Rs 335 | Stop loss: Rs 295 | Upside: 8%
After a prolonged consolidation, recent price action has pushed the stock above its horizontal trendline resistance.
This week, the stock has given a fresh breakout above the key resistance levels of Rs 295 along with marginally higher volumes which suggest that upside is likely to continue in the coming sessions.
The momentum oscillator RSI (14) is reading in a higher high higher bottom formation on the weekly chart with positive crossover and currently reading near 55 levels.
Escorts | Buy | LTP: Rs 1,247.20 | Target price: Rs 1,330 | Stop loss: Rs 1,200 | Upside: 7%
After consolidating in a broad range of Rs 1,100 - 1,200 for almost a month, the stock has witnessed a breakout above its rectangle pattern on the daily timeline.
On a broader timeframe (monthly), relative strength (RS) has shown outperformance compared to the benchmark index Nifty.
Moreover, prices are trading above the 50, 100 & 200-week exponential moving averages, which is positive for the counter in the medium to long-term.
On the weekly chart, the MACD indicator is showing positive bias, reading above its line of polarity with positive crossover.
The momentum oscillator RSI (14) on the weekly chart is reading in a higher low higher high formation which is above 70 levels with positive crossover on the cards.
The stock had been trading in a higher high higher low formation for the last couple of months which resulted in a rising channel pattern on the daily timeframe.
On September 15, the bearish candle closed below its trendline support and witnessed a rising channel breakdown on the daily chart.
The stock has formed a bearish engulfing candlestick pattern on the weekly timeframe and RSI (14) has drifted near 50 levels with negative crossover and slanting lower.
(The author is a Technical Analyst at Bonanza Portfolio)
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