Nifty's set-up remains weak, expect further correction: HDFC Securities

Over the last few weeks, the Nifty has been in a correction mode. The downtrend was confirmed when the support of 17,613 was broken.

On the daily chart, we see that Nifty remains in a downtrend despite the bounces seen in the last two sessions. The index continues to make lower tops and lower bottoms over the last few weeks. The 20-day SMA also continues to trade below the 50-day SMA, indicating a negative moving average crossover. Weekly momentum readings like the 14-week RSI are also in a decline mode.

While we remain open to pullback rallies, we expect the Nifty to eventually move lower in the coming sessions. A larger correction is likely once the 16,782 supports are broken.

Stock picks: 
 

Buy Navin Fluorine

Navin Fluorine has shown relative strength this week. While the Nifty index has lost 0.32 per cent, Navin Fluorine has gained a healthy 8.1 per cent. In the process, the stock has also broken out of its recent trading range on the back of healthy volumes.

Technical indicators are giving positive signals as the stock trades above the 20 day SMA. Daily momentum indicators like the 14-day RSI too have bounced back and are in rising mode now, which augurs well for the uptrend to continue.
 

With the intermediate technical setup looking positive, we believe the stock has the potential to move higher and take out its previous intermediate highs in the coming weeks and therefore recommend a buy between the 3,740-3,760 level. CMP is Rs 3,751. Stop loss is at Rs 3,510 while targets are at Rs 4,130.

Buy GSPL

GSPL is in an intermediate uptrend as it continues to make higher tops and higher bottoms over the last several months. After correcting recently and finding support at the 50 week SMA, the stock bounced back this week on the back of above average volumes.

Technical indicators are giving positive signals as the stock trades above the 200-day EMA. Daily momentum indicators like the 14-day RSI too have bounced back and are in rising mode now, which augurs well for the uptrend to continue. With the intermediate technical setup looking positive, we believe the stock has the potential to move higher in the coming weeks and therefore recommend a buy between the 310-315 levels. CMP is Rs 312.85. Stop loss is at Rs 300 while targets are at Rs 350.

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Disclaimer: Subash Gangadharan is Senior Technical and Derivative Analyst at HDFC Securities. He doesn't hold any position in these stocks. Views are personal.

Note: The below picks are for the next 15-26 trading sessions