On July 5, Nifty gained more than 100 points amid buying in metal and banking stocks to close at 15,834, its highest level since June 25.
On July 2, the benchmark index recovered from the lower levels and closed in the green after four sessions of consecutive fall. This move has saved Nifty from closing below the important support level of 20-day EMA, currently placed at 15,697.
The index found support on the upward sloping trendline, adjoining the daily lows of April 22, 2021 (14,151) and May 14, 2021 (14,591).
In the derivative segment, we have seen Put writing at 15,600-15,700 levels.
Though Nifty witnessed correction last week, it has not violated important supports of 15,600-15,700 levels.
On the higher side, a close above 15,900 would result in a fresh breakout towards 16,100-16,200.
India VIX closed at the lowest level since December 2019. Lower VIX indicates volatility has reduced significantly.
While we remain open to further upsides, a short-term trend reversal would be confirmed if Nifty closes below 15,600.
For traders, our advice is to remain bullish and accumulate longs on declines with the stop loss of 15,600 on a closing basis.
On the higher side, Nifty is likely to find resistance at 15,915 and 16,100 levels.
The sectors that are looking strong on the medium to long-term charts and are expected to outperform in the coming weeks are IT, pharma and metals.
While Nifty is trading in a narrow range, the Nifty Smallcap index broke out on the daily chart last week. We expect their outperformance to continue in the coming days also. Therefore, the focus of the traders should be on mid and small-caps for higher returns.
Here are three buy recommendations for the next 2-3 weeks:
Maithan Alloys | LTP: Rs 1,097 | Target price: Rs 1,325 | Stop loss: Rs 1,000 | Upside: 21%
This stock has broken out on the weekly chart by surpassing the previous resistance of Rs 1,025.
Accumulation is happening in the stock as volumes have been sharply higher on up days as compared to down days for the last few weeks.
Plus DI is placed above the minus DI while the ADX line is placed above 25 on the weekly charts, indicating momentum in the current uptrend.
JK Lakshmi Cement | LTP: Rs 600 | Target price: Rs 690 | Stop loss: Rs 550 | Upside: 15%
This stock has broken out from the last one-month consolidation on the daily chart to close at an all-time high level.
Intermediate and long-term momentum readings like the 14-week and 14-month RSI are in rising mode and placed above 60.
It has been forming a bullish higher top higher bottom pattern on the weekly chart.
HG Infra Engineering | LTP: Rs 414 | Target price: Rs 475 | Stop loss: Rs 370 | Upside: 15%
This stock has been forming bullish higher top higher bottom patterns on the daily and weekly charts.
After a sharp up-move during in May, it has witnessed a correction.
During this correction, the stock took support at the previous all-time high (April 2018) and bounced back.
The primary trend of the stock is positive as it is trading above its 20 and 50-day EMA.
As oscillators like RSI and MFI are in rising mode and placed above 60, the stock may gather upside momentum very soon.
(The author is a technical research analyst at HDFC Securities)
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