The Nifty50 index has shown encouraging signs of reversal this week. Starting with an Open=Low of 22,353, the index is now marching toward 23,000, bringing renewed optimism to Dalal Street. The positive movement has set the tone for traders, and the growing momentum suggests a potential shift in market sentiment. This upbeat movement comes amidst a short-covering rally in over 40% of F&O stocks, a clear sign that the bears are gradually losing their grip on the market. As the short positions are covered, the possibility of bullish momentum seems ever more likely.
Here are three stocks to watch closely for traders looking to capitalise on this potential reversal.
1. Adani Enterprises
After a dip to Rs. 2,026, the stock price has surged by over 10%, reaching Rs. 2,300. This sharp rally is particularly significant as it follows a consolidation phase, signalling that the stock may be ready for another leg up. The daily Point & Figure (P&F) chart reveals a compelling bullish pattern— the Triple Top Breakout (TTB)- when the price surpasses the resistance formed by two consecutive X-columns at similar highs. This breakout suggests that the stock has successfully broken past key resistance levels, potentially leading it to higher levels in the near term.
Given the renewed bullish momentum and the technical breakout, Adani Enterprises is potentially poised for upward movement, and traders may want to consider adding it to their watchlist for further gains.
2. Cholamandalam Investments & Finance Co. (CholaFin)
Cholamandalam Investments & Finance Co. (CholaFin) is another stock that has caught traders attention. It is currently at a five-month high and has broken out of a seven-day trading range, signalling a potential continuation of its bullish trend.
The slope of the 20-period Donchian Channel is trending bullish, and the breakout is accompanied by a positive shift in the Relative Strength Index (RSI), which is now strengthening in the bullish zone. This combination of price action and RSI momentum is a strong indicator that the stock is under the control of the bulls, and it could be heading toward its all-time high of Rs. 1,642. The technical setup suggests that CholaFin has potential room to run, and traders may want to keep an eye on this stock as it could offer attractive upside potential.
3. BHEL
Bharat Heavy Electricals Limited (BHEL) has recently faced significant pressure, with the stock hitting a 52-week low earlier this month. However, the charts are now showing signs of a potential reversal. One of the key technical patterns that suggests a change in trend is the inverted or bullish Head & Shoulders pattern, which typically indicates that a bearish trend is coming to an end and a bullish reversal is underway. Moreover, the stock trades above the crucial Rs. 200 mark, with resistance around Rs. 205.
If BHEL convincingly breaks above this level, it could trigger a wave of short-covering and propel the stock higher. The recent trendline resistance and the bullish reversal pattern suggest that BHEL is on the cusp of a potential breakout, making it an attractive stock to watch for traders looking to capitalise on a reversal in the engineering sector.
Opportunity in the Air
As the Nifty50 index pushes toward 23,000 and the market sentiment swings in favour of the bulls, now is an exciting time for traders. The short-covering rally and technical setups in stocks like Adani Enterprises, Cholamandalam Investments, and BHEL indicate the potential for sustained upward momentum.
While the market shows signs of reversal, monitoring key technical levels and staying vigilant is important. With these three stocks on your radar, you could be well-positioned to take advantage of the optimism in the market and participate in the rally that could unfold. The shift from bearish to bullish sentiment could potentially bring exciting growth opportunities, so keep an eye on these stocks as they continue to move higher.
Disclaimer
Note: We have relied on data from throughout this article. Only in cases where the data was unavailable have we used an alternate but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Brijesh Bhatia has over 18 years of experience in India’s financial markets as a trader and technical analyst. He has worked with UTI, Asit C Mehta, and Edelweiss Securities. Presently, he is an analyst at Definedge.
Disclosure: The writer and his dependents do not hold the Stocks discussed in this article. However, clients of Definedge may or may not own these securities.
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