Hot Stocks | 'Don’t go short! Hold Nifty longs with 9,600 as stop loss'

Vinay Rajani

Nifty and BankNifty formed a “Harami” candlestick pattern and “Inside” bar pattern on their daily charts. In the present scenario, this pattern has bullish implications if the high made on June 15 is taken out in the coming days.

On June 15, Nifty and BankNifty registered highs at 9,943 and 20,470, respectively.

Nifty found support on the upward sloping trend line adjoining the bottoms of March 24, 2020 and May 27, 2020.

The 20-Days simple moving average (SMA) was also placed at similar levels derived from the trend line. At present, the upward sloping trend line and 20-DMA are placed at 9,610 and 9,619 levels, respectively, which means that the support level has shifted upward from 9,544 to 9,600-9,620 levels.

Volume weighted average by taking the base of June 8 when top of 10,328 was made which implies a strong resistance in the zone of 10,000-10,020.

There has also been call writing happening at the strike price of 10,000 in the Nifty. So, Nifty would remain in the correction mode unless it closes above 10,050. However, stock-specific and sector-specific bullish move, we cannot rule out.

On the positive side, Nifty has formed a higher top at 10,328 preceded by the higher bottom at 8,806 on the daily charts, which sounds bullish for the overall trend.

RSI oscillator has also made a higher top along with the price level in Nifty, which confirms that there is no development of negative divergence and the recent upswing of 8,806 to 10,328 carries more strength than the previous upswing of 7,511 to 9,889.

Though Nifty witnessed correction of 784 points from 10,328 to 9,544, there are good enough evidences which confirms that it could resume its upward swing and the recent down move could end up as a running correction in an overall bullish trend.

Considering the evidence discussed above, we can expect Nifty to consolidate for a while between 9,600 and 10,000. Unless Nifty closes below 9,600, dips should be utilized to create long positions.

A close above 10050 would ignite the upswing and bring momentum in the market. Positional resistance for the Nifty is seen at 10,550, which happens to be 61.8% retracement of the entire downswing seen from 12,430 to 7,511. A close below 9,600 could drag the Nifty towards 9,250 odd levels.