By Nagaraj Shetti
After showing a fine intraday upside recovery from the lows on Tuesday, Nifty continued with selling momentum on Wednesday amid volatility and closed the day lower by 154 points. The intraday upside recovery of mid part has failed to sustain and the weakness got intensified in the later part of Wednesday’s session. Nifty finally closed lower with minor upside recovery note.
A reasonable negative candle was formed on Wednesday with minor lower shadow. Technically, this pattern indicates a follow-through weakness in the market. The optimism created after the Tuesday upside recovery has been negated on Wednesday and Nifty closed below the low of previous candle at 14,771.
The higher bottom status of the market is still alive, until the Nifty sustains above 14,416 levels. As long as this area is protected in the coming sessions, the chance of Nifty showing an upside bounce from the lows is higher.
The inability to move above the recent swing high of 15,044 (29th April) recently and the failure of upside range breakout (on 10th May) could bring some more weakness in the market in short term. After showing resilience in the previous session, the broad market indices have given their intraday gains and slipped into minor weakness on Wednesday.
The short term trend of Nifty seems to have reversed down within a broader range movement. There is a possibility of some more weakness in the coming sessions and we expect the recent swing low of 14,416 could be protected and the market could bounce from the lows in short term. Immediate support is placed at 14,620.
Buy KNR Construction Ltd- (CMP Rs 213.80)
As per the weekly timeframe chart of KNR Constructions Ltd indicate a gradual down trend in the last few months till last week. The stock price has witnessed a sustainable upside bounce so far and is currently trading higher. This is signalling the formation of a bullish flag or pennant type pattern. Hence a sustainable upmove above the upside breakout point of Rs 214-215 levels could open a sharp trended upmove in the stock price ahead. Weekly 14 period RSI has turned up from near 60 levels, which indicate a strengthening of upside momentum in the stock price.
Buying can be initiated in KNRCON at CMP (213.80), add more on dips down to Rs 204, wait for the upside target of Rs 235 in the next 3-4 weeks. Place a stoploss of Rs 199.
Buy Aditya Birla Fashion and Retail Ltd – (CMP Rs 186)
The recent downward correction in this stock price (ABFRL) seems to have reversed up, as the stock price has witnessed a sharp upside bounce in this week, after consolidation movement in the previous two weeks. We observe bullish sequential movements like higher tops and bottoms on the weekly chart. Recent swing low of Rs 163.10 could be considered as a new higher bottom of the sequence. Volume and weekly 14 period RSI shows a positive indication.
Buying can be initiated in ABFRL at CMP (186), add more on dips down to Rs 179, wait for the upside target of Rs 205 in the next 3-4 weeks. Place a stoploss of Rs 175.
(Nagaraj Shetti is a Technical Research Analyst at HDFC securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)