Representative image | Source: Unsplash
Nifty continued its downward journey for the fifth consecutive day as it plunged 306 points, or 2 percent, on Monday to close at 14,676, its lowest close since February 2.
This was the highest single-day fall in the Nifty after December 21, 2020.
Last week, Nifty violated the crucial support of the upward sloping trendline, adjoining the highs of January 13 and January 21, 2021.
Nifty closed below its 20-day EMA supports and now the short-term trend has turned negative.
On the weekly charts, Nifty has formed a bearish engulfing pattern, which is a bearish trend reversal indication.
Indicators and oscillators like RSI and MACD have shown negative crossover coupled with negative divergence on the daily charts, which increases the chances of extension of the fall in Nifty.
On the derivatives front, we have seen Call writing at 14,800-15,000 levels.
On February 2, Nifty formed a gap between 14,336-14,470 which is yet to be filled and it may act as an immediate support zone for the Nifty.
Any close below 14,336 would mean that the correction could accelerate further and Nifty could attempt to touch 14,000.
Traders are advised to take profits in the long positions and turn bearish on every pullback that Nifty gives from here.
If Nifty does not move above 15,000 on any pullback rally, the intermediate downtrend will remain intact.
Immediate support for the index is placed in the range of 14,336-14,470.
Here are two sell and one buy recommendations for the next 3-4 weeks:
Federal Bank | Sell | LTP: Rs 79.75 | Target price: Rs 72 | Stop loss: Rs 84 | Downside: 10%
The stock has broken down on the daily chart with higher volumes as it closed at the lowest levels since February 1, 2021.
The short-term trend of the stock has turned negative as it closed below its 5 and 20-day EMA.
RSI has broken down from the upward slopping trendline, indicating weakness in the stock.
Moreover, private bank as a sector is looking weak on the charts.
Mahindra & Mahindra | Sell | LTP: Rs 838.20 | Target price: Rs 778 | Stop loss: Rs 880 | Downside: 7%
The short-term trend of the stock has turned negative as it closed below its 20-day EMA with higher volumes.
Oscillators like RSI and MFI are showing weakness in the stock. Besides, auto as a sector is looking weak on the charts.
Firstsource Solutions | Buy | LTP: Rs 101.90 | Target price: Rs 115 | Stop loss: Rs 96 | Upside: 13%
The stock has broken out on the daily chart with higher volumes as it closed at the highest level since December 28, 2020.
The short and medium-term trend of the stock is bullish as it is trading above its all-important short-term moving averages.
Oscillator like RSI is showing strength in the stock.
(The author is a technical research analyst at HDFC Securities)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.