By Nagaraj Shetti
After showing massive upside recovery from the lows on Monday, Nifty slipped into weakness amidst a range movement on Wednesday and closed the day lower by 187 points. A small body of positive candle was formed at the lows with upper and lower shadow, which indicate a formation of Doji or high wave-type candle pattern. Technically, this market action displays high volatility in the market. Normally, a formation of such candles after a reasonable up-move or down move could signal impending trend reversals.
Having formed this candle within a high low range of Monday, the predictive value of this candle pattern could be less. Hence, this could be a part of narrow range movement at the hurdle of 16800 levels. The formation of lower tops is intact on the daily chart and Monday’s high of 16815 could now be considered as a new lower top of the sequence. The crucial overhead resistance around 16800-17000 levels is intact as per the concept of change in polarity and this area is going to be a make or break for the market ahead.
The market continued with choppy trend. Having, placed below the important resistance the upside recovery from the lows is lacking its strength. A decisive move below the immediate support of 16480 could open further weakness towards 16200 levels in the short term. A sustainable buying could emerge only above 17000 mark.
Buy GUJARAT AMBUJA EXPORTS LTD- (CMP Rs 203.20)
The sharp downtrend in the stock price seems to have completed, as we observe a formation of bottom reversal at Rs 171 in the last couple of weeks. After the formation of bullish patterns like long-legged Doji type candle patterns in the last week, the stock price bounced up sharply this week and is trading higher. The stock price is also sustaining above weekly 10 and 20 period EMA. Volume and weekly RSI indicate more upside for the stock price ahead.
Buying can be initiated in GAEL at CMP (203.20), add more on dips down to Rs 195, wait for the upside target of Rs 225 in the next 3-4 weeks. Place a stoploss of Rs 188.
Buy Avadh Sugar and Energy Ltd- (CMP Rs 565)
The sharp weakness of the last few weeks seems to have reversed up in this Sugar stock as per the weekly timeframe chart. The formation of a lower shadow in the last two weekly candles indicates an upside reversal in the stock price. Hence the recent low of Rs 500 last week could be considered as a new higher bottom formation. Volume has started to expand and weekly RSI shows positive indication.
Buying can be initiated in AVADHSUGAR at CMP (565), add more on dips down to Rs 543, wait for the upside target of Rs 625 in the next 3-4 weeks. Place a stoploss of Rs 528.
(Nagaraj Shetti is a Technical Research Analyst at HDFC securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)