Anil Manghnani, Modern Shares & Stock Brokers says 5820-5830 is the key support level for Nifty but if it closes below 5820, there could be a deep correction.
It is worrying to see some of the heavyweights show early signs of panic yesterday because till then, only the midcap and smallcaps were pounded, he says in an interview to CNBC-TV18.
If 5820 is breached, 5600-5500 levels could come in jiffy. However, Manghnani thinks that range could hold and would be a major buying opportunity.
Stock specifically, he believes every rally in Siemens should be sold into and the stock could see levels of Rs 480 also. In Titan Industries one can look at a short-term trade rather than positional trade for now.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: After yesterday’s correction what would the next course be for the Nifty?
A: 5820-5830 remains the key support zone, 5830 being a key Fibonacci number. I am looking at 5820 again because it is the weekly close, and it is the 20-week exponential moving average. So, as long as it holds that level maybe a bounce is possible. However, any close below 5820, will see a faster and a deeper correction.
What is worrying is that till yesterday; while the Nifty was drifting it was only the midcaps and the small caps continued to get pounded but yesterday we saw the first early signs of some of the heavyweights getting beaten down for example, ICICI Bank or Yes Bank. These stocks till yesterday, were holding out. Even Sun TV broke through a crucial 50 day average at Rs 435 was down 6-7 percent. Some of the heavyweights, which were holding out pretty much throughout this correction showed early signs of panic.
If we close below 5820 then a lot of the heavyweights also will join the party, because some of the midcaps and small caps are so oversold that it will be difficult for them to fall too much from here, at least in the short-term. Therefore the concern is that is we do not get the large caps starting to participate in this downside move.
Q: 5820 is just 30 points away. If it breaks for some reason over the next few days what kind of levels on the way down would you expect?
A: The general consensus has been around 5600. So, somewhere between 5600 and 5500 would come in a jiffy. The reason I say this is because if you look at the stocks, the initial 5-7 percent fall is gradual and then when they break key supports like 50-day moving averages or 20-week moving averages. the falls tend to get faster. That is what might happen with the Nifty, the fall would be sharper and you could get a couple of days of hundred point moves and Nifty would be at 5600-5500 very swiftly.
However, that range would hold. So even if we went that far, that would be the major buying opportunity because between 5600 and 5500 you have 200-day moving averages, 50-week moving averages and you also have the 20-month moving average. I think that would become the floor in this correction. That is why I think if 5820 breaks the fall could be a lot faster
Q: Are you comfortable selling Siemens?
A: The stock has fallen quite a bit from that buyback around Rs 800-900 but now it has completely broken down on the charts. So maybe because it is oversold, it might bounce back a little bit, but I think every rally should be sold into. Maybe keep Rs 600, the 20-day average as your stop, but this stock is eventually headed to Rs 480. I know it sounds a lot for a big stock like Siemens but it has broken through pretty much every support on the chart.
Q: You have a strategy on Titan Industries this morning?
A: The stock although weak on the charts has fallen quite a bit. It has taken support right at the 200-day and the 50-week moving average which is somewhere in the range between Rs 253-251. Keep a stop loss at Rs 251.
It tends to move with gold and gold also has bounced off from USD 1,560 back to USD 1,580 per ounce. Titan after hitting Rs 253 by the end of trade bounced yesterday. It may follow-up a little bit more towards Rs 268-271, so a little bit of a quick short-term trade rather than a positional trade right now.