Technically, on an intraday basis, the market is diverging positively and forming "inverted head and shoulders", which is an indication of a likely shift in short term trend of the market.
By Shrikant Chouhan
Except Friday, the market was down all of last week. The damage was severe for largecap stocks such as Reliance Industries, HDFC Ltd, SBI and UPL.
Vertical drawdowns were seen in stocks such as Reliance Infra, Yes Bank, DHFL and Zee Entertainment. The NSE500 survived just above October’s lowest level and most of the strong companies saw selective buying, which is positive, especially for the midcap and smallcap indices.
We feel major participants are shifting from largecap companies to mid-size companies. However, it would be too early to say that investors are shifting, for that we need to see consistency in a similar trend at least for a month.
The current week is extremely important, as a lot of Nifty50 heavyweights will declare their numbers for the June quarter.
US Fed’s decision and the trade talks between the US and China could also bring abnormal volatility in the market during the week.
Technically, on an intraday basis, the market is diverging positively and forming "inverted head and shoulders", an indication of a likely shift in short-term trend of the market.
A breakout level is above 11,310. The strategy should be to trade long above 11,310 and add more if Nifty corrects towards 11,260. A stop loss should be placed below 11,210.
Most of the largecap companies have corrected to their important support levels and are due for a pullback in the short term.
As per time theory, strong markets would not break the level of 11,108 till the end of July. In case Nifty manages to sustain above 11,108 level, then it would result in gradual pullback towards 11,600 or 11,700 in two months.
However, failure to do so could result in one more round of profit-taking in the medium term. As per technical analysis, 11,200/11,100 would be major supports for the market and select buying is advisable around the same.
On the higher side, 11,450/11,500 would be hurdles. The focus should be on PSU Banks and Auto companies to buy with a medium-term view.
(The author is a senior VP (Technical Research), Kotak Securities)
Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.