Stocks to buy: Two stock recommendations from MarketSmith India for 21 January
Source: Live Mint
Nifty 50 on 20 January
The Nifty 50, India’s benchmark index, opened with a positive gap-up, taking cues from the global markets and Q3 numbers of Kotak Bank and Wipro. Later, it traded in a volatile manner. However, it has protected its Friday’s low. The index opened at 23,290, traded within the range-bound zone of 23,390–23,170, and closed at 23,345. The market action during the day formed a bullish candle, with a lower wick indicating buying support at lower levels. On the sectoral front, banking, financials, metal, and energy sectors were the top gainers, while FMCG and auto declined the most. The advance-decline ratio was inclined toward advancers and settled around 2:1.
From a technical perspective, the index is still trading below all its key moving averages and key technical support levels. The slope of the 14-day relative strength index (RSI) has turned in an upward direction. However, it is still trending in the bearish zone and is currently positioned around 41. The moving average convergence/divergence (MACD) indicator is still trending negatively below its central line.
According to O’Neil’s methodology of market direction, we shifted the market status to a rally attempt as on last Thursday. From here, we would prefer to see a follow-through day before shifting the market status to a confirmed uptrend. On the downside, the recent low of 23,047 is a key level to watch, a fall below this level may cause the market direction to change from a rally attempt to a correction.
Currently, the index is trending below all its key moving averages on the daily chart, along with a negative sentiment. On the downside, the immediate support at 23,000 is a key level to watch, as a fall below 23,000 may move toward 22,800–22,700. However, in the case of an upside bounce back, 23,600 and 23,800 are the immediate resistance.
How Nifty Bank performed
On Monday, the Bank Nifty opened with a gap-up, taking cues from Kotak Bank’s Q3 numbers, and traded in positive territory throughout the day. Yesterday, the index formed a bullish candle with a higher-high and higher-low price structure on the daily chart. The index opened at 48,834.15 and traded within the range-bound zone of 49,650.60-48,683.60, closing at 49,350.80.
The momentum indicator, the 14-day RSI, slightly advanced upward and is currently positioned around 43 on the daily chart, while the moving average convergence/divergence (MACD) indicator is still trending negative.
According to O’Neil’s methodology of market direction, the Nifty Bank staged a follow-through day as it advanced more than 1.7% on volume higher than yesterday. Hence, we are upgrading the market status to a confirmed uptrend from a rally attempt.
The index is currently trending below its 200-DMA, which is currently placed around 50,800. Further, the 50% Fibonacci retracement level of the recent fall is also placed in the same zone. Hence, from now on, 50,800–51,000 is the key level to watch on the upside. On the flip side, support is placed around 48,600.
Stocks to buy, recommended by MarketSmith India:
Bajaj Finance Ltd: Current market price ₹ 7,440 | Buy range ₹7,250–7,480 | Profit goal ₹8,600 | Stop loss ₹6,960 | Timeframe 2-3 months
Paras Defence & Space Technologies Ltd: Current market price ₹1,100 | Buy range ₹ 1,070-1,110| Profit goal ₹1,295 | Stop loss ₹1,018 | Timeframe 2–3 months
