A new all-time high was formed at 14868 and Nifty showed volatility near all-time highs. By Nagaraj Shetti
The uptrend continued in the market for the third consecutive sessions on Wednesday and the Nifty closed the day higher by 142 points. After opening on a positive note, the market slipped into intraday decline soon after the opening and filled the upside gap completely. A sustainable upside bounce has occurred in the market during early to mid-part of the session and shifted later into a range move in the mid to later part of the session.
A new all-time high was formed at 14868 and Nifty showed volatility near all-time highs. A small positive candle was formed with upper and long lower shadow. Technically, this pattern could mean a high wave type candle at the new highs. Normally, this action signal confusion state of mind among participants at the highs. But, the optimism created after a sharp upside bounce could indicate less possibility of any major bearish implication of this pattern, as per daily timeframe chart.
The new all-time high formation at 14868 on Wednesday has resulted in a faster retracement of the last downswing. Recently, the market has consumed 6 trading sessions to complete its down leg, which started from the high of 14753-21st Jan.
The sharp upmove of the last three sessions has retraced this down leg in three sessions compared to 6 sessions of decline. The previous broken support (trend line and moving averages) has been regained and that subsequently resulted in a false downside breakout. This action could be a positive for the market and one may expect further upside in the near term. However, the placement of long term resistance by the way of cluster trend lines could offer temporary resistance for the market around 14800 levels.
The short term trend of Nifty continues to be positive. Having placed at the resistance zone of around 14800 levels, there is a possibility of volatility or minor profit booking from the highs of 14800-14900 levels in the short term, but eventually this hurdle is going to be taken out on the upside. Immediate support is placed at 14750.
Stock Picks:
Buy CARE RATINGS LTD- (CMP Rs 523)
The weekly timeframe chart of CARE Ratings Ltd signal a formation of crucial bottom reversal. After showing a weakness in the last couple of months, the stock price has bounced back smartly, post the formation of reversal candle pattern in the last week at the low of Rs 461. The upside bounce in the stock price has emerged from the cluster supports like horizontal line (support line as per change in polarity) and 20 week EMA around Rs 470-475 levels.
Weekly 14 period RSI is currently placed just below 60 levels. Its sustainable move above 60 could further strengthen upside momentum in the stock price.
Buying can be initiated in CARE RATING at CMP (523), add more on dips down to Rs 500, wait for the upside target of Rs 580 in the next 3-4 weeks. Place a stop-loss of Rs 485.
Buy TRENT LTD – (CMP Rs 678)
The sharp downtrend in the stock price seems to have reversed and the stock price has witnessed a sustainable upside bounce in the last few session. The downside breakout of the trend line support at Rs 630 of last week seems to have turned out to be a false downside breakout, as the stock price witnessed upside bounce and regained the lost support area in the subsequent week-as per weekly chart. We observe positive chart pattern like higher highs and higher lows on the weekly chart. The recent swing low of Rs 585 could be considered as a new higher low of the pattern. Hence, one may expect further upside in the near term.
Buying can be initiated in TRENT at CMP (678), add more on dips down to Rs 650, wait for the upside target of Rs 750 in the next 3-4 weeks. Place a stop-loss of Rs 630.
(Nagaraj Shetti is a Technical Research Analyst at HDFC Securities. The views expressed by the author are his own. Please consult your financial advisor before investing.)
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