By Subash Gangadharan
Markets slid down further this week before recovering sharply from the lows. The bounce-back happened from close to the 200 day EMA. Selling pressure again seen on Wednesday ensured it was a negative and volatile week. On the Daily chart, we observe that 200 day EMA has acted as a support during the recent fall as Nifty bounced back strongly from there. But short term trend still remains down as the Nifty has failed to fill the recent gap area and cross the recent swing highs. 14-day RSI too is in decline mode, indicating more short term weakness is possible.
The downside target is at 16858 (200 day EMA) once the support of 16958 is broken. We expect buying to emerge from these support levels. In the coming weeks, the Nifty could therefore trade in a range between the 16800-17500 levels. Our view would turn wrong if the Nifty breaks the 200 day EMA currently at 16858.
The below picks are for the next 15-26 trading sessions
Buy Apollo Tyres
Target: Rs 240
Apollo Tyres has shown relative strength this week. While the Nifty index has lost 0.78% this week, Apollo Tyre has gained 5.13% over the same time period. In the process, the stock has also broken out of its recent trading range on the back of above-average volumes.
Zooming into the daily chart, we can also observe that the 20 day SMA has recently crossed above its 50 day SMA, indicating a positive moving average crossover. The stock is also trading above the 20 week SMA and weekly momentum indicators like the 14-week RSI too are in rising mode and not overbought, which augurs well for the intermediate uptrend to continue.
We, therefore, believe the stock has the potential to move higher and take out its previous intermediate highs in the coming weeks. We recommend a buy between the 208-212 levels. CMP is 210. Stop-loss is at 195 while target is at 240.
Buy Dr. Lal PathLabs
Target: Rs 3050
Dr. Lal PathLabs has recently reversed its short term downtrend when it crossed its previous swing high of 2843 recently. After taking a breather, this week the stock has again started rising and is now on the verge of taking out its recent highs.
Technical indicators are giving positive signals as the stock trades above the 20 day and 50 day SMA. Weekly momentum indicators like the 14-week RSI have bounced back and are in rising mode now.
With the intermediate technical setup looking positive, we believe the stock has the potential to move higher in the coming weeks and therefore recommend a buy between the 2780-2820 levels. CMP is 2799.85. Stop-loss is at 2680 while target is at 3050.
(Subash Gangadharan is a Senior Technical and Derivative Analyst at HDFC securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)