Buy these stocks for near-term gains as Nifty enters choppy waters after strong rally

After showing up-move with range bound action in the last four sessions, Nifty witnessed sharp profit booking from the highs on Wednesday and closed the day lower by 104 points amidst a volatile movement.

By Nagaraj Shetti

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After showing up-move with range bound action in the last four sessions, Nifty witnessed sharp profit booking from the highs on Wednesday and closed the day lower by 104 points amidst a volatile movement. Nifty opened on a positive note, made an attempt to move up in the early to mid-part of the session. Another new high was registered at 15,800 levels and sharp intraday weakness got triggered in the afternoon to later part of the session.

A long bear candle was formed on the daily chart after many sessions of small range movement on the upside. Technically, this pattern indicates the emergence of profit booking in the market from the new highs. This pattern could signal a formation of a reversal pattern and a follow-through weakness from here is expected to confirm the reversal and that is likely to trigger more weakness in the market.

The positive sequence of higher highs and higher lows comes into picture now and the present weakness could be in line with the formation of new higher bottom. On the other side, the market has been in a sharp trended up-move over the last 15-16 sessions and one day declines have been used to move up further during this period. 

Wednesday’s decline seems to have dampened the effort of bulls to sustain the highs. The formation of a long bear candle at the new highs open chances of reversal pattern. But, follow-through weakness in the subsequent session is expected to confirm the reversal and that could open more weakness for the short term. Crucial supports to be watched at 15,560 and a decisive move below this area is expected to drag the market to lower 15,400 levels.

Stock Picks: 

Buy Mahindra Logistics Ltd- (CMP Rs 588.15) 

The stock price was moving in a larger consolidation pattern as per weekly timeframe chart and is now making an attempt to stage upside breakout of the range at Rs 280-285 levels recently. Hence, this pattern could be considered as an upside breakout of triangle type pattern. A sustainable upside from here could open a sharp upside potential for the stock price. We observe bullish chart pattern like higher highs and higher lows as per the weekly chart and the post consolidation upside breakout has been furious in past. Weekly 14 period RSI has turned up from near 62 levels and this could be considered as strengthening of upside momentum.

Buying can be initiated in MAHLOG at CMP (588.15), add more on dips down to Rs 565, wait for the upside target of Rs 648 in the next 3-4 weeks. Place a stoploss of Rs 550.

Buy NTPC Ltd – (CMP Rs 118) 

The stock price has been in a consistent uptrend over the last few months as per the positive chart pattern like higher tops and bottoms. The recent broader range movement has been broken on the upside in this week and the stock price moved up and is currently placed to form a new higher top of the sequence. But, the higher top reversal needs to be confirmed, as there is no sign of reversal at the highs. Volume has started to rise with upside breakout in the stock price and weekly RSI turned up from near 60 levels. This is positive indication.

Buying can be initiated in NTPC at CMP (118), add more on dips down to Rs 114, wait for the upside target of Rs 130 in the next 3-4 weeks. Place a stoploss of Rs 111.

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