Shabbir Kayyumi
The market lost 1,200 points in a single month, marking July 2019 as the biggest losing streak since September 2018. The Nifty is trading below short term moving average (20-DMA), mid-term moving average (50-DMA) and long term moving average (200-DMA), indicating a downtrend in all time frames.
In the absence of major domestic and global triggers, selling pressure could continue in the coming session towards the line of parity & strong psychological mark of 10,500. On the other hand, the majority of the momentum oscillators are in the oversold zone and the possibility of a bounce back from lower levels in coming sessions cannot be ruled out. But bearishness will continue, unless we see a close above previous week's high placed around 11,311 level.
Bank Nifty
The Bank Nifty traded lower throughout the last week and closed below 200-DMA almost after five months of uptrend forming a big bearish body candlestick pattern, which indicates a negative bias will continue. At the same time, oversold oscillators on lower time frame suggest the possibility of the short-term bounce back towards 29,000.
Moreover, banking index can continue to trade lower towards crucial support of line of parity placed around 27,600-level and trading range would be 27,600-29,200 for the coming week.
Following long trade can be attempted while maintaining strict stop loss:
REC Limited: Buy | Buy Around: Rs 130 | Target: Rs 160 | Stop Loss: Rs 114 | Upside: 23 percent
Stock bottomed out near the levels of Rs 134-130 and has been consolidating for last few days on the daily chart. Emergence of green candles near the 200-day SMA on the daily chart indicates upside movement in the coming sessions.
Daily momentum indicator RSI seems to be turning northward, while forming positive divergence on the daily chart also creating positive rhythm in the scrip.
Furthermore, bullish crossover in MACD adds the conviction of buying the scrip around Rs 130 for the target of Rs 160, with stop loss of Rs 114 level.
Adani Green Energy Limited: Buy | Buy Around: Rs 45 | Target: Rs 55| Stop Loss: Rs 40 | Upside: 22 percent
The daily chart of the stock reveals that demand is increasing and supply is diminishing. The rising trend line at higher levels is displaying trend continuity and creates buying opportunity at the current juncture.
Apart from this, a positive crossover in MACD signals optimism, suggest upside move in the counter in coming sessions. We suggest buying Adani Green around Rs 45, with a stop loss of Rs 40 and target Rs 55.
Power Finance Corporation: Buy | Buy Around: Rs 105 | Target: Rs 125 | Stop Loss: Rs 95| Upside: 19 percent
After hitting the peak of Rs 138, stock slipped around 23 percent from where chances of developing of demand is higher and prices took support from its 50-week SMA's on the daily chart. As of now, formation of double bottom on the daily chart is giving cues to accumulate this stock at lower levels.
The RSI is also about to bounce from the oversold zone and currently it took a turn to the north . As long as it sustains above 95 level, possibility of moving on the upside is higher and it can hit our target of Rs 125 with an ease. Buy PFC around Rs 105, with a stop loss of Rs 95 and for target of Rs 125.
AU Small Finance Bank Limited: Buy | Buy Around: Rs 665 | Target: Rs 740 | Stop Loss: Rs 625 | Upside: 11 percent
The stock has retraced around 50 percent from the peak of Rs 718 and currently it has shown signs of bottoming out around Rs 650-640 zone. Formation of series of doji candles on the daily chart is showing halt in its retracement. Emergence of the green doji near the demand zone, which comes at 20-DMA on the daily chart, show the possibility of bounce back further on the upside.
Moreover, with decent volume participation, we recommend a buy in this scrip at Rs 665, with a stop loss of Rs 625 for an upside target of Rs 740 levels.
Reliance Industries Limited: Buy | Buy Around: Rs 1,160 | Target: Rs 1,240 | Stop Loss: Rs 1,120 | Upside: 7 percent
Scrip seems bottoming out at its lower levels of Rs 1,130-1,140 from where it is going to form bullish engulfing pattern on daily chart suggesting upsurge on higher side. Weekly RSI seems to be bottoming out from its oversold levels and daily RSI has been taking support from its rising line, which is giving cues that scrip can take a turn to the north.
Rising histogram in MACD in the negative territory is showing its upside move in coming sessions. Aforementioned rationale suggests buying in the scrip around Rs 1,160 for the target of Rs 1,240, with a stop loss of Rs 1,120 level on closing basis.
The author is Head of Technical & Derivative Research at Narnolia Financial Advisors Ltd.
Disclosure: The company/analyst (s) does/do not have any holding in the stocks discussed but these stocks may have been recommended to clients in the past. Clients of Narnolia Financial Advisors Ltd. may be holding aforesaid stocks. The stocks recommended are based on our analysis which is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
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