The month of May started on a weak note and the Reserve Bank of India’s surprise move to hike rates triggered a sell-off on May 4, sending the Nifty below the key support zone of 16,800.
The following day global markets played the spoilsport. It was one of the worst weeks in the last three months as the Nifty shed more than 4 percent. Typically, global factors trigger such substantial selloffs but this time but this domestic factors were at play and global cues fuelled the corrective move.
We did not expect the fall to extend below 16,500 but when global uncertainty comes, no level is respected. Globally, things are extremely bleak and it will be difficult to assess the situation.
We would avoid going short aggressively. If we take a glance at the daily time frame chart, we can see 'Pennant' pattern target in the vicinity of 16,200 – 16,000, which is not far away from the current level. We rather wait for some reversal during the week.
On the higher side, 16,500 followed by 16,700 are the immediate levels to watch out for.
Here is one buy and one sell call for the week:
Hero MotoCorp: Buy | LTP: Rs 2,563.35 | Stop-Loss: Rs 2,440 | Target: Rs 2,660 | Return: 4 percent
Hero MotoCorp is one of the underperforming automobile stocks have seen some recovery in the last month and a half. Towards the end of April, the price broke out from the congestion zone after forming a strong base around Rs 2,200–2,300.
It was the first sign of trend reversal on the smaller time frame, which was followed by some consolidation through the week. On May 6, the counter saw a smart surge despite the broader market selloff.
With this resilient nature, the stock has now confirmed a higher top, higher bottom formation on the daily chart. We recommend buying the stock at around Rs 2,540– 2,530 for a trading target of Rs 2,660. The stop-loss can be placed at Rs 2,440.
SRF: Sell | LTP: Rs 2,301 | Stop-Loss: Rs 2,395 | Target: Rs 2,260 | Return: 2 percent
This stock is known to be stable, with a series of higher highs, higher lows on all time-frame charts for the last many years. Recently, the price went through a modest correction, which appeared to have arrested the Rs 2,500-mark.
On May 6, the stock succumbed to the overall weakness in the market. Considering, the negative placement of momentum oscillators, we expect the correction to extend a bit this week.
We recommend selling on a minor bounce towards Rs 2,330–2,350 for a near-term target of Rs 2,260. The strict stop-loss needs to be placed at Rs 2,395.
Disclaimer: The views and investment tips expressed by 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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