Nifty short-term outlook looks green, HDFC rallies back

Special to Firstpost

CNX Nifty (5,808.40): The price action in the Nifty was in line with expectations and the index fell to the support zone of 5.650-5,700 mentioned in the past few weeks. It is positive to note that the support at 5,650-5,700 held and the Nifty staged a sharp recovery on Friday. This is a sign of strength and the completion of a bullish “Morning Star” candlestick pattern strengthens the short-term positive view.

The index could now rally to the immediate resistance at 5,860-5900 range. This view would be invalidated if the index falls below the Wednesday’s low of 5,680. Investors may build long positions in a staggered manner for a quick 3-5 percent pop in the index.

While the short-term outlook is positive, the index has to breakout past the prior balance zone at 5,970 to indicate a reversal of the downtrend and resumption of the medium-term uptrend.

On the forex front, the US Dollar faltered near key resistance of Rs 59-60 and the weakness in the past couple of trading sessions is a healthy sign from a stock market perspective. Unless the Dollar snaps back quickly and moves above Rs.59, there would be a strong case for a slide back to the immediate support at Rs.56.3-56.5 range.

Bank Index (11,922.85): Similar to the Nifty, this index too met its target of 11,500-11,600 mentioned in the past few weeks. The bounce off the support on Friday is a healthy sign and there appears scope for further upside potential.

The short-term outlook for the index is bullish and a rally to 12,250-12,300 appears likely. The likes of State Bank of India, Punjab National Bank and IDFC come across as prime candidates to participate in the anticipated short-term bounce.

The short-term positive view would be under threat if the index closes below the Thursday’s swing low of 11,650.

Cipla (Rs 377.95): After a sharp slide off the May 17 high of Rs 428, the stock has been in a consolidation mode in the past few days. The fall was arrested right at the key support at Rs.360-365 range, which is a sign that the buyers are active in this zone.

The short-term outlook is positive and a rally to Rs 395 appears likely. Long positions may be considered with a stop loss at Rs 363 for a target of Rs 395. A move past Rs 395 could help the stock rally to the key resistance at Rs.406.

HDFC Bank (Rs 665.30) : After having touched a high of Rs 727 on 30 May, the stock has been in a steady slide in the last couple of weeks. This fall was halted on Friday right at the important support at Rs 655-660 range. The bounce on Friday confirms the presence of buyers at the support zone.

Investors may buy the stock with a stop loss at Rs.650 for a target of Rs 710. A breakout past Rs 715 would trigger a rally to the major resistance at Rs 728.

(The views and recommendations featured in this column are based on the technical analysis of historical price action. There is a risk of loss in trading. The author may have positions and trading interest in the instruments featured in the column.)