With regard to the intermediate levels, 7,800 followed by 7,500 could be the next supports for Nifty
There has been no respite for the bulls on D-Street so far during the week amid weakness in the global markets.
The domestic market witnessed severe selling for the fourth consecutive week, with the benchmark indices losing more than 15 percent.
Nifty closed near the 10,000-mark last week and has now breached the 8,000 level with ease.
At this juncture, it is trading with a cut of around 17 percent, while the Nifty Bank index has lost around 20 percent from the previous week to settle near the 20,000-mark.
At present, the technical supports are not working since the fall has more to do with the overall sentiment.
Earlier, we expected the 9,500–9,000 zone to attract some buying but that possibility has been ruled out as Nifty has breached the 8,000-mark.
Currently, the index is hovering near 8,000 level, which is the 78.6 percent Fibonacci retracement of the entire rally from 6,826 to 12,430.
Further, there is a major hidden divergence in the monthly RSI of the Nifty index, and this will not be negated if 6,825 remains intact during this month.
Also, the momentum oscillators on all the timeframes are showing signs of exhaustion. Thus, the above-mentioned evidence indicates that the range of 8,000–7000 can be a place where the market is likely to bottom out.
With regard to the intermediate levels, 7,800 followed by 7,500 could be the next supports. On the other hand, in case of any recovery, 8,600 would be the first hurdle above which there could be strong bounce towards the 10,000-mark since the fall also was vertical.
Traders are advised to start picking quality Nifty50 stocks and deploy some of their capital in the range of 8,000–7,000.
Here are three buy calls for the next 3-4 weeks:
During the recent fall, Reliance Industries has corrected more than 40 percent from the peak of Rs 1,600 to end near Rs 900 mark.
At present, the stock is approaching its 100-month exponential moving average, which is placed at Rs 800 and the stock has never breached this level convincingly since 1998.
This time, too, we feel that even in the worst-case scenario, Rs 800 could be the zone, which the bulls will try to protect.
Traders are advised to buy the stock on dip from Rs 900 to Rs 840 for the target of Rs 1,100 with a stop loss of Rs 760.
During the ongoing crash, the Nifty Metal index has been one of the worst performers and has corrected almost 37 percent from a peak of 2,900.
Currently, the index is trading near the lower end of a falling channel, which it has been respecting since January 2018.
Being a high weightage candidate in the Nifty Metal index, Tata Steel also has a similar price structure and is trading very close to the lower end of the falling channel.
In addition, we are witnessing a positive divergence in the weekly and monthly chart of the stock which indicates the possibility of a bounce.
Traders are advised to buy the stock on a dip near Rs 270 for the target of Rs 330 with a stop loss of Rs 240.
Since the beginning of the year, Tata Motors has crashed around 65 percent from its peak of Rs 202 to reach Rs 70-mark.
The stock has been trading in a highly oversold zone for several weeks.
At present, it is hovering near Rs 68 level, which is the potential reversal zone of the bullish AB=CD pattern formed by joining the swing highs and lows of Rs 240, Rs 106 and Rs 202.
The risk-reward ratio looks highly lucrative to go long for short-term traders.
Traders are advised to buy the stock on a dip near Rs 70 for the target of Rs 84 with a stop loss of Rs 63.
(The author is Senior Technical Analyst, IndiaNivesh Securities)
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd, the parent company of moneycontrol.com.The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.