Two stocks recommendations by MarketSmith India on 19 February

Among sectors, except IT, energy, and public sector enterprises, all major indices closed negative to flat. However, the advance-decline ratio was heavily inclined towards decliners as the ratio stands at 1:3.

From a technical standpoint, the Nifty continues to trade around its crucial support range of 22,700-22,800 levels. The index continued to trade below all key moving averages with negative bias. 

The 14-day Relative Strength Index (RSI) is currently trending sideways, positioned at approximately 39. Additionally, the Moving Average Convergence Divergence (MACD) indicator has witnessed a negative crossover below the central line.

According to O'Neil's methodology of market direction, on Monday, MarketSmith India downgraded the market status to a Downtrend as Nifty breached its swing low of 22,787. 

Looking forward, MarketSmith India will shift the market to a ‘Rally Attempt’ when Nifty closes in the green for the first time or closes in the upper half of the day’s range and stays above that low for three straight sessions. From there, MarketSmith India would prefer to see a follow-through day before shifting the market back to a ‘Confirmed Uptrend’.

Looking ahead, the immediate strong support is placed at 22,800-22,700 levels. However, falling below these ranges may turn more negative in the coming days. Further, sustainable trading above 23,000 may attract some bounce back towards the 23,350-23,400 range.

Nifty Bank's performance

The Bank Nifty continued to trade below all its key moving averages and closed Tuesday 172 points lower at 49,087.30. The index started the session on a muted note at 49,212, and traded largely in the narrow range of 48,815-49,328 levels. As a result, the index formed a bearish inside bar candle on the daily chart. Except for Kotak Bank, HDFC Bank, and Axis Bank all the banking stocks closed lower.

From a technical standpoint, in Monday's session, the index faced resistance at its 21-DMA. The 14-day Relative Strength Index (RSI) is trending sideways and currently placed around the 44 level on the daily chart. The Moving Average Convergence/Divergence (MACD) also is on a verge of negative crossover on the daily chart below its central line.

According to O'Neil's market direction methodology, MarketSmith India downgraded the market status to an ‘Uptrend Under Pressure’ on Friday last week, as the index breached its 21-DMA and also the distribution day elevated to six showing weakness in the index. 

MarketSmith India will change the status to a ‘Downtrend’ if the distribution day count increases or if Nifty Bank fails to hold above the correction low of 47,898.35. On the flip side, the market status will be changed back to a ‘Confirmed Uptrend’ if the index retakes 50,641.75 (its recent rally high).

The index has breached its 21-DMA, which was placed near 49,338. It will need to be watched vigilantly to track the strength in the market in terms of price action. Once the index reclaims and holds above its 21-DMA then it might move in the range of 50,000-50,500. However, on the downside, immediate support is placed near 48,700-48,500.

Stocks recommended by MarketSmith India

Sundaram Finance Ltd: Current market price: ₹4,689.70 | Buy range: ₹4,600-4,720 | Profit goal: ₹5,570 | Stop loss: ₹4,280 | Timeframe: 2–3 months

Narayana Hrudayalaya Ltd: Current market price: ₹1,367.80 | Buy range: ₹1,340-1,380 | Profit goal: ₹1,630 | Stop loss: ₹1,250 | Timeframe: 2–3 weeks

 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.