The Nifty50 after witnessing a stellar rally from 16,700 – 17,900 has paused with a bearish technical set up near 17,900 levels on the daily time frame. The index has formed a Bearish Engulfing candlestick pattern on the daily chart and the prices are sustaining below the same.
In terms of broader pattern, benchmark index has shown resistance around downward sloping line which is currently near 17,727 on weekly basis. Though the Nifty is sustaining above 20 days (17,508) and 50 days (17,121) exponential moving average (EMA). Both is sloping upward.
Currently, 20 days EMA (17,508) is providing strong support to indices, till the time one don't see any breakdown below 17,500 levels there will be chances of sideways market trend.
Here are two buy calls for next 2-3 weeks:
Engineers India: Buy | LTP: Rs 70.95 | Stop-Loss: Rs 65 | Target: Rs 85 | Return: 20 percent
Engineers India have been trading in the downward-slopping wedge. This week it is strongly holding above the wedge. There is a Pole-Flag pattern just near the top of the channel which is giving a prior indication of the continuation of the current trend. The chart formation has shifted in higher high higher low formation.
The stock is holding above 20 and 50 days EMA. The differences between both of the moving averages are getting contracted at the same time slop of both EMA is moving upwards.
The RSI (14,9) is moving near 60 levels after 14 months. It is also holding above EMA of 9.
All the above observation is sufficient evidence to keep a bullish view of the stock. On the higher side, Rs 82 is the nearby resistance zone and on the lower side, Rs 65 will work as major support.
One can go long in the stock with a stop-loss below Rs 65 levels for the target of Rs 82.
Exide Industries: Buy | LTP: Rs 171 | Stop-Loss: Rs 158 | Target: Rs 193 | Return: 13 percent
Exide is having multiple pattern confluence at the same time on different time frames. There is a 'Triple Bottom Pattern' on a monthly basis where the third bottom has been made with a downward sloping channel that has broken out. The support has taken on 200 days EMA, a monthly time frame.
On the daily chart, it has completed an 'Inverted Head and Shoulder' pattern with the neckline at Rs 166 levels. The prices are moving above important moving averages of 20, 50, 100 & 200 EMA. There are multiple bullish crossovers as 20 EMA is cutting 50 EMA and 100 EMA is also cutting 200 EMA. The slopes are bullish.
Post cross-overs the difference between the moving average is getting expanded. Monthly and daily RSI (14,9) is also holding above 60.
The confluence of pattern and confirmation on moving averages is given clear buy signals in the counter. One can adopt the strategy of buying in the dip in the range of Rs 165-170 for the target of Rs 193 with a stop-loss below Rs 158 on a daily closing basis.
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