Stocks picks of the day: Buy Nifty with stop loss of 10,600

Nifty continued its winning streak for the last five days on the trot to end the day with gains of 82 points at 10,888 levels on Monday. From the low of the last week, Nifty surged 550 points in a span of just 5 sessions.

Nifty50 has also broken out above the downward sloping trend line, adjoining high of September 3, 2018 (11,752) and December 3, 2018 (10,941). During the last week, Nifty reclaimed a level above its 200-DMA, placed at 10,757.

The Nifty50 is currently above its 20, 50, 100 and 200-days EMA, which indicates the positional uptrend in the index. The Nifty could extend the rally towards 10,950 and 11,200 levels. On the other hand, support for Nifty is seen at 10,600.

As far as Bank Nifty is concerned, it has been outperforming Nifty and the technical setup is bullish. It has given a breakout on Monday by closing above 27,000 levels and is likely to continue its outperformance.

The immediate resistance levels are seen at 27,200 and 27,650. Support is placed at 26,500 in Bank Nifty spot index.

In the derivatives space also, we have seen long positions being built in Nifty and BankNifty Futures. FIIs created fresh longs in the Index Futures’ during the last few days.

Amongst the Options, Nifty Open Interest put-call ratio has risen to 1.61 levels mainly on the back of Put writing at 10,600-10,700 levels.

The Nifty Midcap index and the Nifty Smallcap index started outperforming broader indices since the last week by rising by 3 percent and 4 percent, respectively, as against the 2 percent gain seen in the Nifty. We expect this outperformance to continue for the coming weeks.

Considering the technical and derivative evidence discussed above, we believe that the short-term trend in the Nifty is still bullish and one should remain optimistic about the market for the coming days.

Therefore, our advice would be go long in Nifty with a stop loss of 10,600 levels and targets of 10,950 and 11,200 levels.

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