Nifty closed a tad above 13,500 on December 11 with weekly gains of nearly two percent.
During the week gone by, markets reached yet another milestone of 13,500 with ease as few heavyweight themes did well to guide markets to new record highs.
We have now reached the extreme zone, at least for the current vertical move. In a broader view, 14,000 and beyond levels are very much possible, but for the time being, 13,500-13,600 are the extreme levels as per the few key Fibonacci ratios.
The 'Golden Ratio' (161 percent) on the 'Price Extension' of the recent up move is placed at the current levels. This level coincides with the 200 percent ‘Price Extension’ of the first up leg from March lows.
If we connect all important highs from March 2015 on the monthly chart, we can see a multi-year upward sloping trendline precisely converging around the same levels.
Some cooling off around this crucial junction cannot be ruled out.
We agree with the fact that a strong trend, up or down, doesn't necessarily follow any theory, but there is no harm in being a bit conservative at times.
Hence, for the last 3-4 days, we have been continuously advising booking profits in the rally and avoiding aggressive bets overnight.
On the daily chart, we can now see a ‘Dragonfly Doji’ pattern and with the last two days' intraday swings, 13,400 has become crucial support.
The moment Nifty slides and sustains below this point (which is possible anytime soon), we would see the market witnessing some decent profit booking towards 13,100–12,900 in days to come.
Here is one buy and two sell calls for the next 2-3 weeks:
Shalimar Paints | Buy | LTP: Rs 83.20 | Target price: Rs 98 | Stop loss: Rs 70 | Upside: 18%
Most of the paint stocks did phenomenally well over the past many years. But in the recent rally too, Shalimar Paints remained laggard and did not follow its larger peers.
With the kind of price action we witnessed last Friday, it’s time for this stock to show its mettle now.
We witnessed a gigantic bullish candle along with sizable volumes, confirming a huge breakout on the daily chart.
This led to stock prices traversing weekly ’89-EMA’ with some authority after a long time.
ACC | Sell | LTP: Rs 1,613.05 | Target price: Rs 1,550 | Stop loss: Rs 1,662 | Downside: 4%
The entire cement space has been enjoying a strong bull run since the March lows. However, for the last couple of weeks, these stocks have been a bit under the weather.
We can see the beginning of a profit-booking phase in ACC after reaching its previous record highs and in the process, it has finally broken down below its recent multiple support area around Rs 1,650.
The trend-following indicator ‘Super Trend’ has also confirmed bearishness as the stock prices sneaked below it on a closing basis after two months.
Escorts | Sell | LTP: Rs 1,360.10 | Target price: Rs 1,300 | Stop loss: Rs 1,388 | Downside: 4%
In the auto universe, this stock has clearly been the dark horse this year.
Despite the March fiasco, this stock has managed to clock whopping gains of about 116 percent YTD, which is a remarkable achievement in tough times.
But now with a near-term view, the stock looks a bit overstretched and some sort of profit-booking is overdue.
In fact, if any meaningful decline comes, it should be considered a healthy sign with a broader perspective.
If we take a glance at the daily chart, the stock prices slipped convincingly below the ’20-day EMA’ for the first time in the last few weeks.
This also confirms a small ‘Double Top’ kind of pattern. Hence, some sort of profit-booking in the coming days cannot be ruled out.
(The author is Chief Technical & Derivatives Analyst at Angel Broking)Disclaimer: 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.