By Rajesh Bhosale, technical analyst at Angel One
The prominent highlight of the last week (ended May 10) was the increasing volatility (India VIX), which saw our markets experiencing significant price corrections despite favourable global cues. By the week's end, Nifty witnessed a deep cut of 1.87 percent, ending a tad above the 22,050 mark.
Examining the weekly chart, it's evident that prices have been confined within a range for several weeks. This week, prices moved from the upper boundary to the lower one, signaling a notable shift in trader sentiment. The daily chart depicts a similar pattern, resembling a 'Rising Channel,' affirming a defined range for Indian markets.
On Friday, prices managed to defend the lower boundary of this pattern, coinciding with the 89EMA (exponential moving average), preventing a breakdown. A comparable scenario occurred on April 19, where prices rebounded from this crucial support, eventually reaching a new high. While the previous move was supported by a strong 'Piercing Line' bullish candlestick pattern, this time it's an 'Inside Bar' pattern, still bullish but less significant.
Additionally, the RSI (relative strength index) Smoothened has fallen below its previous swing low, indicating overall bleak conditions. Traders are advised not to be swayed by temporary rebounds and to maintain light positions until concrete signs of a bullish reversal emerge, especially with the impending Lok Sabha election results.
Regarding levels, Thursday's low coinciding with the 89EMA at 21,900 serves as immediate support, followed by previous swing lows in the 21,800 - 21,700 range. On the upside, the zone between the 20 and 50EMA, around 22,200 - 22,300, presents a formidable obstacle.
Here is one buy call and one sell recommendation for short term:
Avenue Supermarts: Buy | LTP: Rs 4,797 | Stop-Loss: Rs 4,610 | Target: Rs 5,140 | Return: 7 percent
Once considered as a trader's delight, this stock has experienced a prolonged period of dormancy over the past year. However, there has been a recent technical breakthrough, with prices surpassing their previous swing high on the weekly chart, affirming a resurgence in the uptrend.
Volumes analysis reveals heightened activity during upward movements compared to subdued volumes during declines, indicating accumulation in this particular counter.
Furthermore, prices comfortably exceed key averages, with oscillators positioned positively, bolstering the buy signal. Despite a widespread market selloff, this stock has demonstrated relative strength, suggesting that its outperformance is poised to persist.
Hence, we recommend buying Avenue Supermarts (D-Mart operator) around Rs 4,800 - 4,750, with a stop-loss of Rs 4,610 and target of Rs 5,140.
IndusInd Bank: Sell | LTP: Rs 1,410 | Stop-Loss: Rs 1,457 | Target: Rs 1,320 | Return: 6 percent
After maintaining the key levels of Rs 1,430 for several months, prices have recently broken below it, signaling a bearish reversal pattern identified as the "Inverse Cup and Handle" pattern. This pattern suggests a bearish price cycle characterized by lower tops and lower bottoms.
Additionally, the Smoothed RSI has fallen below its median level, indicating momentum favouring the bearish side. Given these parameters, it is anticipated that the stock may continue to decline in the near future.
Hence, we recommend selling IndusInd Bank around Rs 1,410 - 1,415, with a stop-loss of Rs 1,457 and target of Rs 1,320.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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