The Nifty50 index has shown encouraging signs of reversal this week. Starting with an Open=Low of 22,353, the index is now marching toward 23,000, bringing renewed optimism to Dalal Street. The positive movement has set the tone for traders, and the growing momentum suggests a potential shift in market sentiment. This upbeat movement comes amidst a short-covering rally in over 40% of F&O stocks, a clear sign that the bears are gradually losing their grip on the market. As the short positions are covered, the possibility of bullish momentum seems ever more likely.
Here are three stocks to watch closely for traders looking to capitalise on this potential reversal.
1. Adani Enterprises Source: Definedge Securities
After a dip to Rs. 2,026, the stock price has surged by over 10%, reaching Rs. 2,300. This sharp rally is particularly significant as it follows a consolidation phase, signalling that the stock may be ready for another leg up. The daily Point & Figure (P&F) chart reveals a compelling bullish pattern— the Triple Top Breakout (TTB)- when the price surpasses the resistance formed by two consecutive X-columns at similar highs. This breakout suggests that the stock has successfully broken past key resistance levels, potentially leading it to higher levels in the near term.
Market Outlook: Nifty at inflection point; defence stocks headed higher?
Given the renewed bullish momentum and the technical breakout, Adani Enterprises is potentially poised for upward movement, and traders may want to consider adding it to their watchlist for further gains.
2. Cholamandalam Investments & Finance Co. (CholaFin) Source: Definedge Securities
Cholamandalam Investments & Finance Co. (CholaFin) is another stock that has caught traders attention. It is currently at a five-month high and has broken out of a seven-day trading range, signalling a potential continuation of its bullish trend.
The slope of the 20-period Donchian Channel is trending bullish, and the breakout is accompanied by a positive shift in the Relative Strength Index (RSI), which is now strengthening in the bullish zone. This combination of price action and RSI momentum is a strong indicator that the stock is under the control of the bulls, and it could be heading toward its all-time high of Rs. 1,642. The technical setup suggests that CholaFin has potential room to run, and traders may want to keep an eye on this stock as it could offer attractive upside potential.
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