Tech call: Nifty below 20-DMA; S H Kelkar, Vidhi Specialty can rally 13-15%

Nifty snapped its three-day rally and ended lower on March 26 led by losses in heavy weights while broader indices ended higher.

At close, Nifty was down 0.42 per cent or 92.1 points at 22,005. Nifty Midcap 100 and Smallcap 100 index gained by 1.05 per cent and 0.41 per cent respectively.

Nifty closed on a weak wicket as its closed below its 5, 11 and 20 DMA. In the derivatives, we have seen aggressive Call writing at 22,200-22,300 levels.

Moreover, in the recent pullback rally, Nifty failed to close above the gap resistance of 22,205-22,256 levels created on March 14, suggesting on the upside 22,200-22,300 level would act as a very strong resistance. Therefore, traders are advised to remain cautious till Nifty closes above 22,300 levels.

On the downside, recent swing low of 21,710 to act as an immediate support. Any close below 21,710 would result into bearish trend reversal, which could drag Nifty towards next support of 21,500-21,550 levels. We expect Midcap/Smallcap space to outperform during the coming days.

Here are two recommendations for the next 3-4 weeks:

BUY S H Kelkar and Company (SHK) | Last close: Rs 207 | Target: Rs 225, 234 | Stop-loss: Rs 192 | Return potential: 13 per cent

Stock price has broken out on the monthly chart from the downward sloping trendline with rise in volumes. Momentum Indicators and Oscillators like RSI and MFI are in rising mode and placed above 60 on the daily chart, indicating strength in the stock.

BUY Vidhi Specialty Food | Last close: Rs 467 | Target: Rs 510, 535 | Stop-loss: Rs 430 | Return potential: 15 per cent

Stock price has broken out on the monthly chart by surpassing the multiple top resistance of 450 odd levels. Primary trend of the stock is positive as it is trading above important short and long term moving averages. Momentum Indicators and Oscillators are showing strength in the monthly chart.

Disclaimer: Nandish Shah is Senior Technical and Derivative Analyst at HDFC Securities. Views are his own.