Weakess to continue
On the daily chart, we can see that the Nifty remains in a downtrend after breaking down from its recent trading range and despite the bounce back seen on Tuesday. The 20-day SMA is also sloping down and on the verge of crossing below the 50-day SMA. Weekly momentum readings like the 14-week RSI are in 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 17,254-17,216 supports are broken.
The below picks are for the next 15-26 trading sessions
Buy Hikal Ltd
Hikal has shown relative strength this week. While the Nifty index has lost 1.51 per cent, Hikal has gained a healthy 7.89 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 Rs 530-538 levels. CMP is Rs 534.35. Stop loss is at Rs 500 while targets are at 610.
Buy Gujarat Gas
After correcting from a high of Rs 786 touched in August 2021, Gujarat Gas found support at the Rs 577 levels in October 2021. These are strong support levels as they are just above the 50-week SMA.
On Tuesday, the stock bounced back smartly from its recent supports and also closed above the 20-day and 50-day SMA. Momentum readings like the 14-day RSI have bounced back from oversold levels and are in rising mode now.
With the intermediate technical set up too looking positive, we believe the stock has the potential to move higher in the coming weeks and therefore recommend a buy between the Rs 640-660 levels. CMP is Rs 651.7. Stop loss is at Rs 610 while targets are at Rs 750.
Subash Gangadharan, Senior Technical and Derivative Analyst, HDFC Securities.