Nifty short-term trend reversed, correction on the way but these 2 stocks could gain

Nifty short-term trend reversed, correction on the way but these 2 stocks could gain

By Nagaraj Shetti

After showing higher level weakness on Tuesday, the Nifty continued with follow-through weakness amidst range bound action on Wednesday and closed the day lower by 149 points. The opening downside gap has been filled partially. A small negative candle was formed on the daily chart with a minor upper shadow. This pattern confirms a short term top reversal at the swing high of 18114 levels and the beginning of a downward correction in the market. The overhead resistance of downsloping trend line seems to have acted as a crucial hurdle for the market and resulted in a trend reversal down. Presently, Nifty is placed above the previous upside gap of 4th April at 17800 levels. 

The short term trend of Nifty seems to have reversed down and the downward correction is on the way. There is a possibility of further weakness in the market down to 17600 levels in the next few sessions. Confirmation of a bearish Island Reversal could open more downside for the market.

Stock Picks:

Buy EQUITAS HOLDINGS LTD- (CMP Rs 114.50)

After showing range bound action in the last one month, the stock price (EQUITAS) has moved up sharply in this week. Currently, the stock price has placed at the edge of witnessing a decisive upside breakout of down sloping trend line around Rs 118 levels. Hence, a sustainable move above this area could open a sharp upside ahead. The larger degree of higher tops and bottoms is intact as per weekly timeframe chart and the stock price has formed a recent higher bottom at Rs 100 levels. Volume and weekly 14 period RSI indicates further strengthening of upside momentum for the stock price ahead.

Buying can be initiated in EQUITAS at CMP (114.50), add more on dips down to Rs 110, wait for the upside target of Rs 127 in the next 3-4 weeks. Place a stoploss of Rs 107.

Buy BOMBAY DYEING & MFG.CO. LTD – (CMP Rs 106.40)

The weekly timeframe chart of BOMDYEING indicates range bound action over the last 5-6 weeks after a sharp decline of Feb month. The stock price is currently making an attempt to stage upside breakout of the range movement at Rs 106-108 levels. Hence a sustainable move above this area could open a sharp upmove for the stock price ahead. The larger degree of positive sequence like higher tops and bottoms is intact and the stock price is now moving up after the formation of new higher bottom recently. Volume pattern and weekly 14 period RSI shows positive indication for the stock price ahead.

Buying can be initiated in Tata at BOMDYEING (106.40), add more on dips down to Rs 102.50, wait for the upside target of Rs 118 in the next 3-4 weeks. Place a stoploss of Rs 99.

(Nagaraj Shetti is a Technical Analyst at HDFC securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)