5177 to be crucial barrier on Nifty: Modern Shares

Excerpts from CNBC-TV18's exclusive interview with Anil Manghnani:

Q: How high are the chances that we get past the 200 DMA and strike out more gains after the breakout?

A: One thing is the major hurdle first has been crossed is the 50 week moving average, that is what pretty much defined the bear phase for at least our selves, where a break below was a problem. The fact that after 6-7 weeks we have closed above both on the Sensex and the Nifty is a very encouraging sign.

Having said that, we are coming to another crucial barrier, about 5,177 on the Nifty, and about 17,280 on the Sensex, these are major 0.618 retracements of the fall. If those are taken out, then the rally would get a lot more momentum, more traders would enter into the picture. It would not be so much a buy on fall; it would just be keep buying with a stoploss at the 50 week moving average.

Above 5,177, and about 17,283, there will still be a relief rally and you will get a lot more technical trading targets but the trading range becomes a lot more wider and then on can safely play for a much longer move rather than worry about 2 days up or 2 days down or one day up or one day down sort of movements which we have seen over the last couple of months.

Q: What’s the chart of IFCI looking now?

A:  I still say it’s a technical bounce. With the stock at Rs 60 odd, with the top of Rs 120, its still half the price so, no clear sign of any major breakout, probably again the news flow that is moving the stock on the upside, in this move, about Rs 69 would be a good exit point.

Q: How are the fertilizer charts looking, Chambal, Nagarjuna?

A: Chambal would be the strongest of the lot, from the fact that it is much closer to its recent top of Rs 90 odd, there is still upside left and about Rs 79 would be the immediate trading target.

Maybe Nagarjuna is trying to break out, it is trying to gain some momentum in the form of the movement of Chambal, around Rs 52 is the major resistance, it hasn’t been able to cross but if it can do so, then the high of the budget day was around Rs 57-Rs 59, that should definitely be tested.

Q: Have you taken a look at the charts of DCB or Orchid?

A: In DCB corporate action is dominating the stock but if it can continue to sustain above Rs 108 and we get more rumors on that merger front, and then the next target would be around Rs 128 for the stock.

The other one is interesting, Orchid Chemicals, the fact that it has moved up so fast, that’s why you are seeing the equal sharpness at the fall also, but it has broken through a key level on Friday around Rs 240, and the next key target becomes now Rs 222.

I think it should hold Rs 222 and then again you may see a bounce but with the news out that may be Ranbaxy now is not interested in a buy back or any thing, then if it breaks Rs 222, then you could have real problems for the stock.

Q: Had a look at Sasken’s charts?

A: I don’t follow that stock that closely but last time when it was around Rs 150, when the results came I said Rs 192 odd would be the first major resistance and I think the stock is finding resistance at Rs 190 levels. The stock really has fallen from a much higher level. But if it needs to gain momentum then it needs to start sustaining above Rs 190 odd levels for the stock to move higher but I think recent rise of about Rs 40 to Rs 50, the fall can be bought into for a trading bounce at least.

Q: How are charts of some of these stocks looking, SRF and Gujarat NRE Coke?

A: SRF I haven’t seen in while but Gujarat NRE Coke still okay on the monthly charts. Given the way the rest of the market has collapsed; this stock actually has made new highs in the last 3 months, so it’s still quite strong. It’s right in a support zone between Rs 146 and Rs 150, as long as it holds its fine but even if it breaks that around Rs 128 is a very good support for the stock.

Q: How are some of the oil stocks looking to you, charts of Cairn, Essar Oil?

A: To be fair, its still one of the outperforming sectors and the way Bank Ex and capital goods lost its leadership qualities of its last couple of year’s rally; this is only one sector which is continuing the leadership or the uptrend of the last 2-3 years. Although Reliance, RPL have higher weight age but even the other stocks, the smaller ones, MRPL, Essar Oil, and Cairn all are doing very well.

Cairn continues to find major resistance around the Rs 268 mark which was the previous top, so obviously till the previous top is not taken out that stock might find it difficult to move too much higher from here but if it can take out Rs 268 then, it’s headed clearly towards Rs 300.

Essar Oil is an interesting one, the results have come out, Rs 299 was the major target, and one can buy the fall, Rs 250 to Rs 240 levels. It would be interesting traders pick especially its quite volatile on the F&O.

MRPL is headed towards about Rs 115. For the bigger ones like RPL the major resistance is around Rs 199 to Rs 204, it has had a fantastic run from Rs 150 levels, so maybe it needs to cool off first before one re-enters.

Reliance also a fantastic run from Rs 2,120 to Rs 2,700 levels, so the fall maybe Rs 2,540 as traders support but a positional player maybe closer to Rs 2,470 to Rs 2,450 levels would be an excellent buy.

My personal opinion is that we are in the upper end of the range, 5,177 and 17,283. I will not be surprised if we just cross it as a false breakout and then again, come back below it but if you are really trying to play the trend, if it closes above that 5,177 and 17,283, one can go long with the view that the 50 week moving average closer to 5,000 to 4,940 levels on the Nifty should be kept as a strict stop loss because if we again dip below the 50-week moving average, then this would just prove as a false break out and then the problems could get deeper. So trade long but do keep strict stop losses definitely.

Disclosure:

It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed