Catch the falling knife! Top 3 stocks that are good buy on dips in a volatile market

Sachin Gupta, AVP, research, Choice Broking said that the Nifty is trading in a wide range from 17000-17600 levels. On the downside, support is seen at 16,800 levels and the resistance is placed at 17780 levels.

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In an interview with Zeebiz's Kshitij Anand, Gupta said the key events that investors should watch out for next week are WPI Data, Trade Balance & US FOMC minutes. Edited excerpts:

Q) Market closed near crucial support levels amid volatility. What led to the price action?

A) Overall, it was a roller-coaster week for the traders as we witnessed momentum in both directions.

After the initial two days of sell-off, the market recovered from the weekly lows and went down again on the last trading day of the week.

The Nifty50 closed at 17374.75 levels while Bank Nifty closed at 38,517.25 levels with a loss of 0.7% on a weekly basis.

On the sectoral front, Nifty Metal gained more than 3.5% while the rest of the indices closed in the red. The Nifty Realty & FMCG dragged almost 2.5% on a weekly basis.

On the stock front, Tata Steel, Vedanta has contributed more than 6% gains, Coal India, Hindalco, and IndusInd Bank also added 3% gains on a weekly basis while on the other side, Indiabulls Housing Finance, GAIL were the prime laggards.

On the technical front, the index has formed a Doji kind of Candlestick on a weekly chart that points out indecisiveness among the traders.

Furthermore, the index is trading below the middle band of Bollinger which suggests downside movement in the counter.

Moreover, the daily momentum indicator Stochastic as well as MACD is also trading with negative crossover. At present, the index has support at 17040 levels while resistance comes at 17650 levels.

Q) What is your view on Sensex, Nifty for the coming week. Key levels and any big events to watch out for?

A) This was a volatile week. After an upside momentum, we have seen selling at the end of the week.

 Technically, Sensex has strong support near 56,400. If the index manages to sustain above the same, then the upside momentum could continue towards 59600 which is also the next resistance level.

A close above 59,600 could push the index towards 60,300.

The Nifty is trading in a wide range from 17000-17600 levels. On the downside, support is seen at 16,800 level and the resistance is placed at 17780 levels.

Events to watch out for next week are WPI Data, Trade Balance & FOMC data.

Q) Sectorally, the action was seen in the metal space while the realty and capital goods sector closed in the red. What led to the price action?

A) After the budget, the Metal index rallied more than 8% in the last two weeks as the finance minister proposed some relaxation to steel scrap.

During the week, the index rose 3.8% ahead of positive global cues while Nifty Realty & Capital goods witnessed further profit booking.

Technically, the Metal index is still looking bullish as compared to Realty & Capital Goods and Metal stocks may continue the upside move for the coming weeks.

Stocks like Tata Steel, Hindalco, Jindal Steel & NMDC have performed well and looks more attractive for the coming sessions -- which may keep the metal index in the leading position.

On the downside, the index has support around 5730 while resistance comes at 6315 levels.

Q) These top 4-5 stocks are trading near oversold levels according to RSI and MFI. Should one look at buying the falling knife?

A)

Kansai Nerolac Paints: Buy on dips| Target 530-550

On a weekly chart, the stock has given a breakdown from the Horizontal Line and traded below it. Moreover, the stock has also moved below Lower Bollinger Band formation, which indicates further bearishness for the near term.

However, the RSI & Stochastic has been moving in an oversold zone that suggests fresh buying from the bottom.

Hence, we are expecting to buy around 470/460 levels for the upside target of 530/550. However, on the downside the support comes at 425 levels.

UTI AMC: Buy on dips| Target Rs 970-1020

After a continued fall, the stock has taken a support at 50% FR and reversed from there. The price has been rising since the last three trading sessions on the daily chart, which suggests further upside in the stock.

Moreover, the stock has also reversed from Lower Bollinger Band formation and moved above 9-days SMA. A momentum indicator such as RSI & Stochastic has turned up from the oversold territory with a positive crossover, which indicates fresh buying for the near term.

Hence, we are recommending buying in UTI AMC around 840/800 levels for the upside target of 970/1020 levels. However, on the lower side, the stock may find around 750 levels.

Jubilant Pharmova: Buy on dips| Target Rs 500-540

The stock is in a bearish trend and falling down since June 21. On the daily time frame, the stock has confirmed the trendline breakdown and moved below Ichimoku Cloud formation, which suggests more downside in the near term.

However, all the supportive indicators are moving in oversold territory, which suggests a reversal, but price action is still negative.

Hence, we are recommending a 'buy on dips' strategy in the stock. So, one can look to buy around 425 or fall in the prices till 400 levels for the upside potential 500/540 levels meanwhile, the stock may also find support around 370 levels.

Q) Banking stock got a boost from RBI policy on Thursday and NiftyBank reclaimed 39000. What are your views on banking space?

A) After the MPC meeting, held on Thursday, the BankNifty crossed 39000 but was unable to hold level, and later we witnessed a further correction.

At present, the Banking index has been trading above Middle Bollinger Band formation & 50-days SMA on the daily chart. The support is placed at 37200 and resistance is lying at 39500 levels in the near term, crossing above the same will confirm the fresh breakout for the target of 40500/41000 levels.  

On the stock front, IndusInd Bank suggests a bullish overview as it is sustaining above a 50-Days simple moving average (SMA).

A momentum indicator such as RSI and MACD also confirms the bullish view with the price action. The support is placed at 925 and resistance comes at 1050.

Also, Bank of Baroda is continuing its upward trend and trading above 200 days simple moving averages.

The stock has given the breakout of Inverted Head & Shoulder Patterns on the daily timeframe. The support is placed at 103 while resistance is at 124 in the near term.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)