Midcaps are yet to perform and the breakout in this index should bring back some excitement in the traders’ fraternity.
The previous week’s price action can be divided into two parts—the first half was more of consolidation with no major movement and the second brought volatility to the market.
We managed to touch the psychologically important mark of 12,000 but failed to sustain there. In fact, due to a sudden selloff in global markets on October 15 over the fear of a second wave of coronavirus hitting major European countries, we witnessed a sharp decline in our markets.
Fortunately, there was no follow-through to this as we saw a modest recovery and the week ended well above 11,700.
In the last couple of weeks, we have seen a remarkable recovery in the Nifty after it tested the 200-day SMA level of 10,800.
Since the move was extremely swift and markets had a winning streak of 10 straight sessions before October 15, any uncertainty was likely to trigger profit-booking and this is exactly what we saw.
Now, looking at charts, this down-move should only be interpreted as a pullback towards the recent trendline breakout points.
This coincides with the 20-day EMA level of 11,600. Hence, all eyes would be on this level during this week.
However, since the fall has to do with global uncertainty, it would be important to see how things pan out and if things worsen, we may see the market correcting further.
A close below 11,600 would apply brakes on the recent optimism and we may then see some extended correction in the market.
Till then, there is no reason to worry as we may see markets resuming strength beyond 11,850-11,900 to surpass the 12,000-mark convincingly.
In the week gone by, we witnessed some sectoral shifts in the second half.
The recent outperforming IT space had seen some decent profit-booking along with Reliance Industries, whereas on the other side, the banking space, which was considered to be a laggard, has shown some strength to support the market.
Going ahead, if the Nifty has to resume the uptrend, the banking space will play a vital role.
Apart from this, midcaps are yet to perform and the breakout in this index should bring back some excitement in the traders’ fraternity.
Here are two buy calls for this week:
JSW Steel | LTP: Rs 311.35 | Target price: Rs 335 - 342 | Stop loss: Rs 288 | Upside: 10%
The metal pack recently went through some consolidation and did not correct in the selloff on October 15. The next day the stocks within this space just took off, especially the steel counters.
In this course of action, JSW Steel gave a stellar move to confirm a huge breakout to hit a new 52-week high.
On a small timeframe, we can see ‘Inverse Head and Shoulder’ pattern, whereas on a larger scale, the bullish ‘Cup and Handle’ pattern has been developed.
Since the upmove is backed by sizable volumes, we can consider this as a genuine breakout and hence it unfolds bigger targets for months to come.
BPCL | LTP: Rs 341 | Target price: Rs 358 | Stop loss: Rs 328 | Upside: 5%
Shares of oil marketing companies have been underperforming over the past couple of months and in the process have damaged their price structures.
However, for the last few days, BPCL was correcting despite a positive divergence in the hourly chart.
When such a condition happens, prices can rebound sharply anytime and a glimpse of it was seen on October 16.
The stock seems to have taken a pause around key retracement levels and the way the daily chart is shaped up, we expect some relief move in the stock.(The author is Chief Technical & Derivatives Analyst at Angel Broking)
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