By Nagaraj Shetti
After showing sharp weakness on Tuesday, Nifty shifted into a consolidation on Wednesday and closed the day lower by 36 points. A small positive candle was formed on the daily chart with an upper shadow. Technically, this formation indicates a type of bullish inverted hammer-type candle pattern, not a classical one. A sustainable move above the high of this pattern at 24605 could confirm the positive pattern for the short term.
Negative chart patterns like lower tops and bottoms are intact as per the daily timeframe chart. Having declined from the recent lower top of 24,978 on 21st Oct, there is a probability of a minor upside bounce in the short term to form a new lower top of the sequence.
The underlying trend of Nifty remains weak. Having placed around the crucial supports as per the weekly chart, one may expect chances of an upside bounce from here or from the lows. A sustainable close only above 24,650-24,700 levels could confirm an upside bounce. However, a slide below 24,350 is likely to drag Nifty down to the 24,000 mark in the near term.
Stock Picks:
Buy Firstsource Solutions Ltd- FSL (CMP Rs 345)
After showing a range-bound movement in the last couple of months, the stock price has moved up sharply so far this week. The overall weekly chart pattern is indicating an upside breakout of a bullish flag-type pattern at Rs 340 levels. Normally, Flag patterns on the uptrend are considered as an uptrend continuation pattern. Another bullish pattern like higher tops and bottoms continued on the long-term charts. Volume has started to expand during the upside breakout in the stock price and the weekly 14-period RSI shows a positive indication.
Buying can be initiated in FSL at CMP (345), add more on dips down to Rs 335, and wait for the upside target of Rs 382 in the next 3-5 weeks. Place a stoploss of Rs 322.
Sell BHEL – (CMP Rs 224)
The capital goods stock BHEL has been in a downtrend over the last couple of months and declined as per the negative pattern like lower tops and bottoms. Fresh weakness has triggered post small upside bounce around the hurdle of weekly 10- and 20-period EMA recently around Rs 280. We also observe a rounding top-type formation at the highs as per the weekly timeframe chart.
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