Nestle India
NESTLEIND recently reached a peak of 2,645 on July 19, 2024, but since then, it has undergone a correction, shedding about 195 points, which translates to a 7 per cent decline in its price. Currently, the stock is beginning to show signs of stabilising as it approaches a critical support level, near its previous breakout range. This level is significant because such breakout ranges often serve as strong support zones, acting as a price floor where buyers might step in. This support area is further reinforced by two key technical indicators: the 200- day Exponential Moving Average (DEMA) and the 0.50 per cent Fib retracement level from the stock’s prior uptrend, which began at 2,317 and peaked at 2,645.
The convergence of these indicators at the current price level highlights the importance of this support zone and suggests it may hold. Moreover, technical indicators are starting to turn favourable. Specifically, the Relative Strength Index (RSI) on the hourly chart has formed a bullish divergence, a pattern that often signals a potential reversal or upward momentum in price.
Considering these technical factors, it is advisable to initiate a long position in NESTLEIND within the price range of 2,500-2,530. The expected upside target is 2,760, with a recommended stop-loss at 2,395 on a daily closing basis to protect against downside risk.
Lodha (Macrotech Developers)
After reaching a peak near 1595, Lodha has undergone a substantial decline, shedding nearly 450 points, which equates to a 28 per cent drop in its price. This significant correction has brought the stock down to a critical technical level, where it has found support at the 200-day Exponential Moving Average (DEMA). The 200 DEMA is a widely recognised indicator used by traders to identify long-term support levels, and in this case, it appears to be playing a crucial role in stabilising the stock.
Adding to the significance of this support level, a bullish bat pattern has emerged right at the 200 DEMA, further strengthening the case for a potential reversal in the stock’s downtrend. The bullish bat pattern, a harmonic trading pattern known for its reliability in signalling potential price reversals, suggests that the stock may be poised for a recovery. Given these technical signals, it is recommended to consider taking a long position in Lodha within the price range of 1,275-1,300.
The potential upside target is set at 1,400, providing a favourable risk-reward ratio. To manage risk, a stop-loss should be placed at 1,232 on a daily closing basis, ensuring that any further downside movement is contained.
Bajaj Finance
BajFinance reached a peak of 7,392 on June 18, 2024, but since then, it has undergone a notable decline, losing approximately 880 points, or about 12 per cent of its value. This drop has brought the stock down to a critical support level around 6,500, a historically significant zone where the stock has previously found stability.
At this juncture, the Relative Strength Index (RSI) on the hourly chart is showing a bullish divergence near this support level, a technical signal that often indicates a potential reversal in price trends. This suggests that the current price levels might offer a favourable buying opportunity. Adding further weight to this view, a bullish bat pattern has emerged right at the 6,500-6,600 support zone.
The bullish bat pattern, a harmonic trading pattern known for predicting price reversals, reinforces the likelihood of a turnaround in the stock’s recent downtrend. Given these technical indicators, we recommend taking a long position in BajFinance within the price range of 6,575-6,600. The potential upside target is set at 7,000, with a stop-loss at 6,385 on a daily closing basis to effectively manage risk and protect against further downside.
(Jigar S Patel is a senior manager of equity research at Anand Rathi. Views expressed are his own.)
First Published: Aug 19 2024 | 6:51 AM IST
