By Nagaraj Shetti

After showing sharp weakness and intraday upside recovery on Tuesday, Nifty shifted into a consolidation with weak bias on Wednesday and closed the day lower by 37 points. A small positive candle was formed at the lows with minor upper and lower shadow. Technically, this pattern indicate a formation of high wave type candle pattern. Normally, such formations after a reasonable decline could hint at a possibility of halt in present trend and this needs to be confirmed with reasonable upmove in the subsequent sessions.

The crucial support of 10 period EMA on the daily chart is intact and this average has been offering crucial supports for the Nifty on dips for many occasions in the last 35-40 sessions. Having sustained above this support on Tuesday and Wednesday, the odds of upside bounce is likely in the coming sessions.

The short term trend of Nifty remains negative. But, lack of sharp follow-through selling and an emergence of buying from the lower supports suggest chances of upside bounce in the market in the next 1-2 sessions. A sustainable move above the immediate resistance of 17800 could open strong upside bounce towards 18000 mark. Immediate support is placed at 17580-17600 levels.

Stock Picks: 

Buy Bharat Heavy Electricals Ltd- (CMP Rs 62.90) 

After showing consolidation type movement in the last one month, the stock price has witnessed a sharp upside bounce in this week and closed higher. Present upside breakout of the hurdle at Rs 61 seems to have confirmed. This also indicate a confirmation of crucial bottom reversal at Rs 50, which was formed in later part of Aug. The consistent higher bottoms have been formed as per weekly chart and this could mean more upside for the stock price ahead. The weekly 14 period RSI shows positive indication.

Buying can be initiated in BHEL at CMP (Rs 62.90), add more on dips down to Rs 60.50, wait for the upside target of Rs 71 in the next 3-4 weeks. Place a stoploss of Rs 58.

Buy GODFREY PHILLIPS INDIA LTD – (CMP Rs 1164.95) 

After showing minor consolidation in the last week, the stock price continued its sustainable upmove in this week. The weekly chart pattern indicate a decisive upside breakout of the crucial overhead resistance at Rs 1100 levels and the stock price closed higher. The volume expanded in this week along with the upside breakout in the stock price. The weekly 14 period RSI shows further strengthening of upside momentum.

Buying can be initiated in GODFRYPHLP at CMP (1164.95), add more on dips down to Rs 1120, wait for the upside target of Rs 1285 in the next 3-4 weeks. Place a stoploss of Rs 1085.

(Nagaraj Shetti is a Technical Research Analyst at HDFC securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)