Vinay Rajani, Senior Technical & Derivative Analyst at HDFC Securities
The Nifty and Bank Nifty are passing through a choppy phase, where follow-up moves are lacking on both sides. Short-term range for the Nifty was seen at 17,070-17,500. Below 17,070, the Nifty could slide down to 16,810 levels. A level above 17,500 could push the benchmark index towards 17,790 resistance.
Relative setup of Bank Nifty is stronger than Nifty. Support for the sectoral index is seen at 36,650, while resistance for the same is seen at 38,500. From NSE500, number of stocks above 200 DMA has gone below 50 percent for the first time since June 2020.
During last week, we saw the Nifty Smallcap index breaching its 200-day EMA (exponential moving average) for the first time in last 1.5 years. This shows weakening breadth of the market. The Smallcap index looks weak and it is advisable to stay away from this space. In case of market recovery bets should be taken only on large-caps with expectation of conservative returns.
RRG (Relative Rotation Graphs) analysis indicates expected outperformance from banks, metals and auto sectors and expected underperformance from the realty, media and IT. Gold has registered a fresh breakout on charts and likely to perform well.
A short-term trend would remain bearish unless the Nifty surpasses the 17,500 resistance. Supports are seen at 17,070, 16,800 and 16,400.
Here are two sell calls and one buy call for next 2-3 weeks:
ICICI Prudential Gold ETF: Buy | LTP: Rs 44.20 | Stop-Loss: Rs 42.45 | Target: Rs 45.5 | Return: 3 percent
Gold in the international market has broken out from the symmetrical triangle pattern on the weekly chart. Indian gold on MCX exchange has also shown breakouts on the short to medium term charts. Gold is expected to outperform the equity markets at least for the short term. ETF (exchange traded fund) named "ICICI Prudential Gold ETF" has broken out from the range on the weekly charts and it is expected to give good returns in the short term.
Aarti Industries: Sell | LTP: Rs 935.30 | Stop-Loss: Rs 970 | Target: Rs 870 | Return: 7 percent
The stock has started forming lower tops and lower bottoms on the daily charts. It has formed bearish Head and Shoulder pattern on the daily chart. It has violated 50-days EMA (exponential moving average) support.
Indicators and oscillators like RSI (relative strength index), MACD (moving average convergence divergence) and DMI (directional movement index) have turned bearish on the short term charts. Stock has violated the crucial support of the rising trend line, adjoining previous swing lows on the daily charts.
Glenmark Pharma: Sell | LTP: Rs 455.60 | Stop-Loss: Rs 473 | Target: Rs 418 | Return: 8 percent
The stock has been forming lower tops and lower bottoms. It has violated the crucial support, derived from upward sloping trend line on the daily chart. Bearish breakout is registered along with the rise in the volumes.
It has been trading below its important moving averages. Pharma index has closed on weak wicket and is likely to underperform for the short-term.
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