Stocks to buy: Two stock recommendations from MarketSmith India for 20 January

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Subscribe to enjoy similar stories. India's benchmark index Nifty50 closed below the 50-WMA and formed another bearish candle on last week's chart. Taking cues from the global and domestic markets, the index started the session with a gap-down opening at 23,277 and continued to trade in negative trajectory, closing at 23,203.20.

It lost gains from the last three days and formed a bearish candle with a lower-high and lower-low price structure. On the sectoral front, IT and banking sectors were the biggest losers, which dented the market sentiment on Friday, while Reliance was the biggest gainer. The advance-decline ratio was almost flat and settled around 1:1.

From a technical perspective, the index is still trading below all its key moving averages and key technical support levels. The 14-day relative strength index (RSI) is trending flat and is currently positioned around 37 on the daily chart, whereas the moving average convergence/divergence (MACD) indicator is still trending negative. According to O'Neil's methodology of market direction, we shifted the market status to a ‘rally attempt’ on Thursday.

Tuesday’s session was considered day one of an attempted rally as Nifty closed in the green. Nifty has not breached the correction low of 23,047 since day one. Hence, today’s action qualifies as day three of an attempted rally.

So, we are changing the market status to a ‘rally attempt’ from a downtrend. From here, we would prefer to see a follow-through day before shifting the market to a ‘confirmed uptrend’. Currently, the index has breached its 200-DMA on the daily chart and the 50-WMA on the weekly chart.