The Indian stock market experienced a significant rally this week, with the Nifty 50 index soaring to new highs. However, seasoned market expert Jigar Patel is advising caution and profit booking at these levels. Patel’s analysis is based on technical indicators that suggest the recent surge might not be sustainable and that investors should focus on stock-specific strategies rather than aggressive market positions.
In this blog, let’s take a closer look at the recent market trends and highlight Jigar Patel’s top three stock picks amidst this market movement.
Nifty 50 surge and key levels to watch
The Nifty 50 index witnessed a powerful surge this week, gaining over 2% to close above 25,400. Early in the week, the index found robust support at the 24,800 level, which coincided with the 38.2% Fibonacci retracement from its previous rally. Despite initial concerns that the index might dip towards 24,600, it held firm and rallied approximately 500 points in a single day, propelled by positive global cues.
However, investors are advised to remain cautious as the daily Relative Strength Index (RSI) indicates negative divergence, signaling potential resistance at current levels. If the Nifty manages to break past 25,450, it could see further gains, potentially climbing to 25,600 or higher. On the downside, 25,000 is a crucial support level, and a break below this on a closing basis could trigger panic selling.
Jigar Patel advises traders to adopt a profit-booking strategy after the recent surge, as the market’s current uptrend may be a short-term pullback in a broader bear market. Patel also recommends focusing on share market investment in specific stocks rather than betting on overall index movements.
Stock pick 1: Som Distilleries and Breweries
Som Distilleries and Breweries saw its stock price peak near ₹149 in May 2024 before falling by 29%, hitting a crucial support level around ₹105-108. This decline has formed a triple-bottom pattern, which is generally viewed as a bullish signal. The stock appears to have found strong support at this level, and a reversal seems likely.
On August 30, trading volumes surged, signalling renewed investor interest. Additionally, the Moving Average Convergence Divergence (MACD) indicator showed a bullish crossover, further suggesting a shift in momentum from bearish to bullish. According to Patel’s analysis, Som Distilleries and Breweries is a strong share market investment candidate at current levels. Investors can consider entering the stock in the ₹118-120 range, with a target price of ₹132. To manage risk, a stop-loss should be placed at ₹112 on a daily closing basis.
Stock pick 2: Bullish pattern in an undisclosed stock
After reaching a peak near ₹70 in July 2024, another stock on Patel’s radar has undergone a 27% correction. This pullback has brought the stock to a key support zone in the ₹50-53 range, where a bullish BAT pattern has emerged. This harmonic pattern, which retraces to specific Fibonacci levels, is often seen as a signal for a potential bullish reversal.
The emergence of this BAT pattern, coupled with the stock’s strong support at a previous demand zone, suggests an imminent reversal. Patel believes this stock presents a good share market investment opportunity at current levels. The recommended buy range is ₹58-60, with an upside target of ₹68. For risk management, a stop-loss should be placed at ₹55 on a daily closing basis.
Stock pick 3: IRCTC consolidates around key support
IRCTC has been consolidating around its 200-day Exponential Moving Average (DEMA), a critical support level that often signals a trend shift. Although the stock attempted to break out of this consolidation range, it met resistance and couldn’t sustain itself above the breakout level. However, the daily RSI has bounced back from the 40 level, breaking a bearish trendline and signalling a potential build-up of bullish momentum.
Jigar Patel advises waiting for a decisive close above ₹953 before entering this stock. If confirmed, the stock could rise towards ₹1,050. The recommended stop-loss is ₹895 on a daily closing basis. This makes IRCTC another favourable candidate for share market investment at the right entry point.
Caution amid market surge
While the recent rally in the Nifty 50 has been encouraging, Jigar Patel urges investors to remain cautious. The market’s current uptrend might not be sustainable, given the negative divergence in the RSI and the resistance levels the index is approaching. Patel’s overall advice for share market investment is to adopt a stock-specific approach, focusing on individual opportunities like Som Distilleries, the stock showing a bullish BAT pattern, and IRCTC. Avoiding aggressive positions is key to managing risk in the current market environment.
Final thoughts
Jigar Patel’s stock picks come with a clear focus on risk management and targeted entry points. As the Nifty 50 approaches resistance, traders should consider booking profits and shifting their attention to these individual stock opportunities for share market investment. By adopting a more selective approach, investors can navigate the current market conditions with greater confidence.
For those looking to capitalise on these opportunities, it’s essential to remain vigilant of market trends and ensure timely profit booking.
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