Stocks to buy: Two stock recommendations from MarketSmith India for Monday-25 November

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Subscribe to enjoy similar stories. The Nifty50 benchmark index made a strong recovery on Friday, driven by short covering in index heavyweights, exit polls signalling a comfortable victory for the BJP in Maharashtra, and positive global cues triggered buying across sectors. The advance-decline ratio of 3:1 favoured the bulls.

Last week, the index found support near its 50-week moving average (WMA) and formed a bullish candle after two consecutive weeks of losses. On Friday, the index opened on a positive note and continued to rise throughout the day, reaching a high of 23,956.10 and forming a bullish candle with a higher high and higher low structure. It also reclaimed its 200-day moving average (DMA) and a horizontal trendline connecting the lows of 5 August 2024, and 4 November 2024.

The 14-period relative strength index (RSI) on the daily chart showed improvement, currently at 41, while the MACD remains negative. Going forward, the bias is likely to remain positive as long as the index stays above its 200-DMA. The current short-term market sentiment suggests that the index may move towards 24,400, which is 38.2% Fibonacci retracement of the recent decline.

According to O'Neil's methodology, however, the trend in this sectoral index remains a "downtrend" as it has reached a new low of 23,263.15. This major sector posted a weekly gain of approximately 1.9%, forming a bullish candle on the weekly chart with a lower high and lower low price structure. Friday's session was quite impressive, as the index opened with a gap-up and remained positive throughout the day, forming a bullish candle following a hammer candle on Thursday.