V-Shaped recovery from lower levels; Nifty reclaims 16350

The week started on a positive note with Nifty testing levels just beyond the 16400 levels however there was no follow up buying and as the week progressed the markets crept lower throughout the major part. On the F&O expiry day, Nifty tested the levels around 15900 and at a point things looked bleak however there was a sudden gush of broad based buying by the end of the session. This positive momentum was followed on Friday to eventually end with weekly gains of just over half a percent tad above 16350.

On the weekly chart, not much has changed and the prices continues to consolidate between the 15700 – 16400 range. The key highlight however is the strong out performance by the banking space and the sharp bounce by the high beta counters that were oversold such as metals and IT counters. Now we have been mirroring the US markets very closely and if there’s no escalation there then we can expect Nifty to break the key hurdle of 16400 and then to trigger further momentum towards 16600 – 16800 levels. On the flip side, we sense good support formation around 16100 – 16000 levels and any dips towards it should be used as buying opportunity.

Stock recommendations:

NSE Scrip Code – HDFCLIFE

 View                  –   Bullish

Last Close          –   Rs. 598.10

Justification – On the daily chart, the stock prices since last few months were facing stiff resistance around the 590 mark and by breaking above the same; we can now observer a rounding bottom bullish breakout. The said breakout is seen with good increase in volume and bullish candle stick pattern. In addition, prices have also closed above 89EMA that acted as strong resistance many times in this calendar year and now indicates a change in polarity. Moreover, a fresh ‘Higher Top Higher Bottom’ can be observed on the weekly chart that augurs well for the bulls. With all the above scenario, we recommend a buy in this counter for a near term target of Rs. 640. The Stop loss can be placed at Rs. 577.

2.  NSE Scrip Code – ITC

View                  –   Bullish

Last Close          –   Rs.269.20

Justification – Once mocked for its under performance, this stock has given remarkable performance in this calendar year by continuously moving in a ‘Higher Top Higher Bottom’ price formation. Now the prices are moving in a ‘FLAG’ formation with the pole formation already been completed and now prices on verge of completing the flag portion. Volume analysis indicates high volume during up move as compared to volumes during the down move which is as per the requirement of the pattern. In addition, prices are well above major moving averages indicating overall bullishness in the counter. We sense this stock will continue to outperform and hence we recommend a buy for a near term target of RS. 290. The stop loss can be placed at Rs 257.