A triple Doji candle formed in the last three days, with a larger-bodied Doji candle on Friday, a close below the last two days, and the MACD histogram showing exhaustion, all signaling a potential near-term correction, said Anand James, Chief Market Strategist at Geojit Financial Services.

"Any short-term correction, if it happens, could be shallow, and such dips may be used to add positions," he added in an interview with ETMarkets. Edited excerpts:

Although Friday ended in the red, completing three consecutive days of descent, the preferred view is that this marks an acknowledgment of the importance of the 50 SMA, from which the downward turn began. Also, the quick bargain buying seen in the dying hours of Friday halted the descent at the 38.2% Fibonacci retracement of the 27 Jan-05 Feb ascent. These two factors set up the potential for a large move in the coming week.

A broad-based recovery move is supported by the fact that about 60% of the NSE 500 constituents closed at least 1% above their respective lows on Friday. This setup encourages a potential upside target of 24,380–24,426, with 24,226 (02 Jan high) offering resistance. Conversely, failure to clear 23,800 or remain above 24,020 after an initial burst could deflate the upside momentum.

The triple Doji candle formation in the last three days, a bigger-bodied Doji candle on Friday, a close below the last two days, and the MACD histogram showing exhaustion all signal a near-term correction. Major index constituents like HDFC Bank, ICICI Bank, SBI, and Kotak Bank show signs of short-term correction and could lead the index down toward 49,600–49,000. However, weekly charts remain positive, with the Stochastic Momentum Index moving above zero, suggesting that any short-term correction, if it happens, could be shallow. Such dips may present opportunities to add positions.

The pharma index looks positive in the short term, forming a large-bodied green candle on the weekly chart. The weekly MACD histogram shows exhaustion at lower levels, and the Stochastic Momentum histogram shows the first reversal bar, indicating a continuation of the current pullback. The pullback in the Nifty Pharma index is expected to continue upwards toward 22,500, driven by stocks like Cipla, Zydus Life, Divi’s Lab, Dr. Reddy’s, Torrent Pharma, Mankind, and Lupin.

The Pharma ETF has seen a bullish engulfing pattern on the weekly chart, with the Stochastic Momentum histogram showing the first reversal bar, suggesting more upside in the coming weeks, possibly towards 22.8 and 23.2.

Rail stocks have been subject to a classic setup: a rally ahead of the budget followed by rejection trades that have hammered them. However, most of them, except perhaps BEML, are either in a consolidation phase or have weekly patterns indicating upswings soon.

SUMICHEM (CMP – 533)
View: Buy
Target: 575
Stop Loss: 509

The stock has been on a slide since September 2024, making lower tops and lower bottoms. This week, the stock broke out of the declining trendline resistance, making a structural change and adding positivity.

The weekly SMIO has moved above the zero line, affirming our expectation of more upside toward 575 in the next few weeks. All long positions should be protected with a stop loss below 509.