Buy these two stocks for gains in coming weeks to beat any short-term trend reversal in Nifty

By Subash Gangadharan

The Nifty has been continuously moving higher almost for four weeks after finding support at the 50-day SMA. The Nifty also remains above the 20 day SMA. Wednesday’s correction was the first major correction seen in the last 4 weeks. The Nifty has in fact made an engulfing line Bearish candlestick pattern.

As this is a bearish pattern, we expect the Nifty index to move lower towards the previous swing lows of 12607 in the coming 3-7 trading sessions. Short term pullback rallies cannot be ruled out.

As the intermediate and long term trend remain up, there is a good possibility that the correction could halt around these levels and the index could consolidate before resuming the intermediate uptrend.

We recommend a go slow approach on fresh longs till we see signs of sustainable strength emerging. Our bearish bets for the next 7 days will be off if the Nifty moves higher and crosses the previous swing highs of 13040.

Buy ONGC

ONGC has shown a lot of relative strength of late. While the Nifty corrected sharply on Wednesday, ONGC surged by 5.91%. On the charts, the stock has recently broken out of a 10 week trading range on the back of above average volumes. This augurs well for the uptrend to continue.

Technical indicators are giving positive signals as the stock trades above the 20-day and 50-day SMA. Intermediate momentum readings like the 14-week RSI too are in rising mode and not overbought.

We believe the stock is ready to continue the next leg of its underlying uptrend and has the potential to move higher in the coming weeks. We therefore recommend a Buy between the 79-81 levels. CMP is 80.6. Stop loss is at 75 while targets are at 93.

Buy Gujarat Fluorochemicals

Gujarat Fluorochemicals has been steadily climbing higher for the last few months making higher tops and higher bottoms. This week, the stock crossed its recent swing highs of 571.5 on an intra day basis on the back of huge volumes. In the process, the stock closed at a 9 month high.

Technical indicators are giving positive signals as the 20-day and 50-day SMA are providing healthy support to the stock. Intermediate momentum readings like the 14-week RSI too are in rising mode and not overbought.

We believe the stock is ready to continue the next leg of its underlying uptrend and has the potential to move higher in the coming weeks. We therefore recommend a Buy between the 550-570 levels. CMP is 563.9. Stop loss is at 510 while targets are at 690.

(Subash Gangadharan is a Senior Technical and Derivative Analyst at HDFC Securities. The views expressed are the author’s own. Please consult your investment advisor before investing.)