By Subash Gangadharan
NSE Nifty 50 has been correcting since last week after touching a high of 18115. These levels also corresponded to a major trend line resistance that has held down the major highs of the last few months. The correction seen over the last few days has led to the Nifty now closing below the 20 day SMA, which is a sign of weakness.
The below picks are for the next 15-26 trading sessions
Buy Shipping Corporation of India
SCI has shown relative strength this week. While the Nifty index has lost 1.79% this week, SCI has gained 4.39% 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 and 50 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 132-136 levels. CMP is 134.4. Stop loss is at 122 while target is at 164.
Buy REC
REC has recently reversed its short term downtrend when it crossed its previous swing high of 127 last week. This week, the stock has taken a breather and corrected a bit. 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 soon move higher and therefore recommend a buy between the 128-132 levels. CMP is 130.35. Stop loss is at 125 while target is at 140.
(Subash Gangadharan, Senior Derivative & Technical Analyst. HDFC securities. View expressed are the author’s own.)