The roller-coaster move of Friday’ session has resulted in a formation of ‘Dragonfly Doji’ candle on the daily chart, says Jay Purohit of Centrum Broking
Instead of going short on the index, we would be vigilant to the market move and will go with the trend (which is up) till we don’t get any significant sign of corrections, Jay Purohit - Technical & Derivatives Analyst, Centrum Broking, said in an exclusive interview with Moneycontrol’s Kshitij Anand.
Q) It has been a roller coaster ride for the bulls in the second week of January. The index rose to fresh record highs on Friday and index closed with gains of 1.1% for the week ended 12 January? Do you think the momentum will continue?
Last week, the Nifty witnessed a gap-up opening on all the trading sessions. On Friday, we saw a sharp decline in the midst of the session. By the time, people were finding the reasons for the fall, index took a complete ‘u-turn’ and closed around its opening point at new highs.
The roller-coaster move of Friday’ session has resulted in a formation of ‘Dragonfly Doji’ candle on the daily chart. The formation of the mentioned pattern at higher levels certainly doesn’t bode well for the Bulls as a sustainable move below the 10,597 may trigger profit booking correction in the index.
Since the ongoing momentum is very strong, we will be with the trend and would rather wait for a confirmation to happen.
At the current juncture, the Nifty has made a short-term support at 10,580 – 10,600 levels and below that the strong support is placed in the zone of 10,400 – 10,440.
On the flipside, 100% extension level of the previous rally comes at 10,836 level, which may act as a strong resistance for the Nifty.
On the derivative front, we witnessed decent writing in 10400 – 10700 put options in the last few days along with unwinding from the call writers, which indicates that the support for the Nifty is inching higher towards 10500 – 10550 levels.
The BankNifty underperformed the benchmark indices in the recent past and added huge open interest (53%) in the last two weeks. These are mixed positions and a move above 25,800 may result in a decent rally in the banking index.
Q) Do you think the press conference carried out by CJI on Friday will weight on D-Street in the coming week?
I think that will not impact much as the index already rebounded after the conference.
Q) How is the market looking on the weekly as well as monthly charts?
The Nifty is making new highs and there is no sign of reversal seen on both weekly and monthly chart of the index. However, the 'RSI' oscillator is showing a series of negative divergence on the weekly chart, which is not a good sign for the index.
Also, if we meticulously observe the weekly chart of Sensex, we are witnessing a formation of Bearish Harmonic Pattern called 'Bearish Deep Crab'.
The BSE benchmark index is currently hovering in the Potential Reversal Zone (PRZ) – 34512 - 34678 - of the mentioned pattern. This pattern is a reversal pattern and indicates a possibility of a short-term correction in the index.
And if Sensex corrects, then Nifty will also move inline of its peer. Thus, we are maintaining cautious approach at higher levels and advising our clients to hedge their long portfolios with long-dated Nifty options.
Q) What should be the strategy -- buy on dips or sell on rallies in the coming week?
As of now, instead of going short on the index, we would be vigilant to the market move and will go with the trend (which is up) till we don’t get any significant sign of corrections. Thus, buy on dips would a prudent strategy at the current juncture.
Q) Top 3-5 stocks which are looking attractive at current levels based on technical?
Here is a list of top 4 stocks which can give up to 45% return in the short term:
RCF: BUY| Target Rs150| Stop Loss Rs85| Time 3-4 months| Return 42%
The stock is moving in a sideways direction and is making 'Lower Highs Higher Lows' on the monthly chart. The consolidation phase of last ten years has resulted into formation of a 'Symmetrical Triangle' pattern on the monthly time frame.
Currently, we are witnessing a breakout from the mentioned pattern with decent volume (see exhibit), which is a positive sign for the stock.
Momentum oscillator such as ‘RSI’ and ‘MACD’ too are supporting the bullish argument on the counter. Thus, traders are advised to buy the stock at the current juncture and on declines to Rs103 for a target price of Rs142 - 150 in the coming 3-4 months. The stop-loss for the trade set-up should be placed at Rs85 on a closing basis.
Bata India: BUY| Target Rs960| Stop Loss Rs685| Time few weeks| Return 29%
After a decent rally from Rs507.60 to Rs832.80, the stock has started moving in a corrective phase from the last couple of months.
The fall got arrested around the 38.20 percent retracement level of the above-mentioned rally and the stock has started rebounding piercingly.
We witnessed a formation of a couple of ‘Doji’ candles on weekly chart around the support levels, which was followed by a positive momentum. The ‘RSI’ oscillator is showing ‘Positive Reversal’ on the weekly chart and thus showing strength in the counter.
Thus, traders are advised to buy the stock at current juncture and on declines to Rs735 for a target price of Rs920 – 960 in the coming weeks. The stop-loss for the trade set-up should be placed at Rs685 on a closing basis.
Titagarh Wagon Ltd: BUY| Target Rs225| Stop Loss Rs157| Time 3-4 months| Return 29%
After a decent rally from Rs105.55 to Rs189.70, the stock has seen some correction in the recent past. However, the stock again started rebounding after taking the support of the 38.20 percent retracement level of the mentioned rally.
On the monthly chart, we witnessed a ‘Trendline’ breakout in November 2017 and the prices managed to sustain above the same.
Considering the positive placement of ‘RSI’ and ‘MACD’ oscillator we are expecting a resumption in the uptrend. Hence, short-term investors can buy the stock at current juncture for a target of Rs205 – 225 in the coming quarter. The stop-loss should be kept at Rs157 on a closing basis.
Rallis India Ltd: BUY| Target Rs325| Stop Loss Rs252| Time Few Weeks| Return 23%
The stock is moving in a sideways direction from last few months; wherein we can see a ‘Higher High Higher Low’ sequence on the weekly chart. We witnessed a breakout from the ‘Continuous Inverted Head & Shoulder’ pattern on the weekly time frame.
The volumes have also increased drastically in the ongoing up move, indicates buying interest from stronger hands.
Since momentum oscillators are also placed positively along with a set of moving averages, we are expecting Rs310 –Rs325 levels in coming few weeks. Thus, traders are advised to buy the stock in the zone of Rs260 – 270 with a stop-loss of Rs252 on a closing basis.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol are his own and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions. The analyst or the company might have a position in the stocks recommended.