Let us look at the pros and cons of this range. The pros first. The Nifty had gone up about 450 points in the current rally, on the daily charts, without any meaningful correction. A correction/consolidation is healthy for the market. We want the Nifty to consolidate and catch up its breath before it starts running again. We don’t want it to keep running, become breathless and then collapse. So in that regard this consolidation will be good for the market and the results will be known once the Nifty crosses 5080.
And the cons? The latest rally, which was today’s rally, failed to reach its earlier highs near 5070-5080 and that signifies that there is weakness in the markets at higher levels. Another interesting observation on the charts is that it has made a small bearish/inverted head and shoulders pattern within this range. This pattern, though, has not been confirmed yet. A break below 5000 will confirm this pattern. The target for this bearish head and shoulders pattern will be about 4940. At this point, there seem to be more negatives than positives in the short term.
There are a few charts which are giving buy signals and have been discussed below. But one’s own discretion is required because we are expecting the broader market to come down a little. Please note that some of these stocks may be available at a cheaper rate in a day or two but the buying signals remain valid till the stop loss level is hit.
Aditya Birla Nuvo is showing some signs of improvement, as can be seen from this daily chart. What looks positive for the stock is the support for the Relative Strength Index (RSI) near 40, as marked by the circle. A move above 1500, which may or may not come tomorrow, should be positive for this textiles stock. A stop loss of 1375 will be prudent while waiting for a target of close to 1700, where it will meet the resistance line.
Arvind Mills, on the daily charts, has broken through its resistance line accompanied by huge volumes. This is bullish for the stock. The RSI is close to 80 and it is generally advised to wait for a pullback before buying. But seeing the chart, we can see that Arvind Mills has closed near the highs of the day without showing any signs of a pullback. Under these circumstances, it can be bought at the current levels with a stop below 50 for a target of between 65 and 67.
Another very interesting chart of Jindal Steel. As can be seen from the chart, the price has been making lower highs while the RSI has been making highs at almost the same level, if not higher. This is known as a bullish/positive divergence when the price is going down but the RSI is going up. Now it is close to its resistance near 2300 after a pattern which looks like a double bottom formation. Not only that the RSI which was finding resistance near the line has broken through it which gives an indication that maybe the price will follow. Buy only if it crosses above 2300 with a stop loss of 2100 for a target somewhere close to 2750.
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