So far, the week has belonged to the bears, as the domestic market remained under pressure during the first three sessions of the week.
Nifty registered a new lifetime high of 12,430 on Monday and nosedived to 12,100-mark in the next couple of sessions. However, a decent recovery on January 23 helped the index recover some of its losses.
At this juncture, Nifty is trading with a cut of 1.40 percent, whereas Nifty Bank index has lost 1.86 percent during this week.
We have been constantly reiterating our view that on the upside, 12,400–12,500 could be a supply zone since that is the placement of a rising trend line.
Also, there was a negative divergence in the weekly and monthly RSI of Nifty, so we witnessed a sell-off in the markets.
Nifty has found temporary support near 12,100–12,040 zone, which is the placement of a rising trend line.
A bounce towards 12,300–12,400 again cannot be ruled out. However, we continue to mention that this could be a final leg of the upward move and a wiser strategy ahead of the Budget could be to book longs in the final week of January 2020, since the above-mentioned negative signals are still intact.
On the downside, a breach of 12,080 would further dent the sentiment.
Here are two buy and one sell calls for the next 3-4 weeks:
Indian Bank | Buy | LTP: Rs 104.45 | Target: Rs 116 | Stop loss: Rs 98 | Upside: 11%
This stock has been in a corrective mode since June 2019 and has come down from a peak of Rs 292 to Rs 100-odd levels.
Thus, it has been trading in an oversold zone on the larger degree charts.
At this juncture, the stock found support near Rs 95 level, which is the placement of a long-term rising trend line.
On the monthly chart, the RSI oscillator is displaying a hidden divergence, which indicates the possibility of a bounce.
Traders are advised to buy the stock near Rs 104 for an upside target of Rs 116 with a stop loss of Rs 98.
GAIL | Buy | LTP: Rs 129.60 | Target: Rs 138 | Stop loss: Rs 124.5 | Upside: 6%
GAIL confirmed a trend line breakout above Rs 129 on the daily chart and has been consolidating near this mark.
The daily volumes indicate some accumulation just before a final throttle.
On the monthly chart, we witnessed a bullish hammer pattern in December 2019 and currently, the stock is trading well above the hammer’s high.
Traders are advised to buy the stock near Rs 129 for an upside target of Rs 138 with a stop loss of Rs 124.5.
HDFC | Sell | LTP: Rs 2,426.15 | Target: Rs 2,350 | Stop loss: Rs 2,500 | Downside: 3%
The stock has been trading with an upside momentum since October 2019 and has rallied around 20 percent after that without any meaningful correction.
On the lager degree chart, the stock took a U-turn exactly from the placement of its rising trend line resistance near Rs 2,500 levels.
The daily ADX (14) indicator has confirmed a negative crossover, which suggests a sharp correction in the coming week.
Traders are advised to sell the stock on a bounce near Rs 2,450 for a target of Rs 2,350 with a stop loss of Rs 2,500.
(The author is a Senior Technical Analyst at IndiaNivesh Securities)
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