Last Friday, we saw a smart recovery to defend the 11,000-mark on a weekly basis.
Barring the last day of the past week, our markets kept sliding lower and didn’t respect any intermediate support in the process last week.
The velocity at which the market came off last week, it might have caught a lot of traders on the wrong foot.
But we were not surprised with it as we have been repeatedly advocating caution in the recent rally.
The way prices looked overstretched, reaching a cluster of multiple Fibonacci ratios and key indicators and importantly the positioning of the US Dollar index recently, we avoided participating in the last phase of the recent euphoria.
The cautious stance initially and then a ‘sell on rise’ has played out well so far.
In our sense, the market is not done yet and although we have seen a smart broad-based recovery on Friday, we expect the selling to re-emerge at higher levels around 11,150-11,250.
On the daily chart, we can see the confirmation of ‘lower top lower bottom’ for the first time since May lows.
Hence, the probability of Nifty sliding below 10,820–10,770 is quite high to test the next cluster of supports around 10,600–10,450.
However, with a broader view, we still believe that this is just a corrective phase within the large uptrend and thus, it is likely to provide a very good opportunity to accumulate quality propositions in a staggered
manner.
But for momentum traders, it’s advisable not to get carried away by in between bounces as we are still not completely out of the woods.
Here is one buy and one sell call for this week:
United Spirits | Buy | LTP: Rs 511 | Target price: Rs 525-530 | Stop loss: Rs 499 | Upside: 4%
The stock has nosedived in the recent broader market sell-off. Due to the relentless fall, the prices entered extremely oversold territory and hence, some relief was very much on cards.
Last Friday, we witnessed a good broad-based recovery in the market and this stock participated well in the move.
Due to this price development, the stock is well poised for further recovery and hence, aggressive traders can bet at the current levels for a pullback move by following strict stop losses.
TCS | Sell | LTP: Rs 2,417.75 | Target price: Rs 2,330 | Stop loss: Rs 2,482 | Downside: 4%
IT sector has been the flavor worldwide in this difficult time of the pandemic. Stocks from this space have given stellar gravity-defying moves over the past six months.
But we are now observing the Nifty IT is reaching a zone of key Fibonacci ratios and for the first time in recent past, we have seen some profit-taking in these stocks.
This may sound a bit contradictory but the way TCS corrected last week, it has certainly dented the recent optimism and hence, momentum traders can look to sell for a target of Rs 2,330 in the coming days.
(The author is Chief Technical & Derivatives Analyst at Angel Broking)
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