The equity market had a cautious start to the week gone by after an extended weekend but as buying gathered pace, the Nifty managed to go past the psychological mark of 18,000.
On August 19, however, the market had a muted opening and soon key indices tanked. With some consolidation in the later hours, the Nifty ended at around 17,750, down more than a percent, trimming most of the gains made during the week.
With indices snapping their eight-day winning streak, the market is in for a volatile run in the monthly expiry week.
From a technical point of view, the large bearish candle formed on August 19 has engulfed the previous three sessions' price movement, which is a sign of weakness.
The index also closed below the five-day exponential moving average (EMA) for the first time since July 26. Hence, in the first half of the week, any bounce towards 17,800–17,875 is likely to get sold into.
Traders are advised to lighten up longs and stay on the sidelines for a while.
Aggressive traders can look to initiate bearish bets by keeping a strict exit strategy beyond 18,000. If we see some nervousness globally, the Nifty can test 17,600– 17,450.
The overall trend, however, remains strongly bullish but since the index has rallied vertically from 16,400, profit booking is likely during the week. This view remains valid as long as the 18,000 mark is not breached on a sustainable basis.
The decline should be considered healthy for the next leg of the rally and used to go long. Trades are advised to keep a close tab on these scenarios and continue with a stock-specific approach.
Here is one buy call and one sell call for the next two-three weeks:
Bajaj Electricals: Buy | LTP: Rs 1,228.35 | Stop-Loss: Rs 1,181 | Target: Rs 1,330 | Return: 8 percent
Towards the later half of June, the stock made a bottom around Rs 850 and then witnessed a vertical move for nearly four weeks. This was followed by long consolidation as prices rested firmly above the 200-simple moving average (SMA).
On August 18, the stock finally managed to confirm a decisive breakout from the recent congestion zone. The price configuration can be termed as a "Bullish Flag" pattern known for its faster moves.
Considering the higher volumes, we recommend buying for a near-term target of Rs 1,330. Traders can participate by following strict stop-loss at Rs 1,181.
TVS Motor Company: Sell | LTP: Rs 958.75 | Stop-Loss: Rs 972 | Target: Rs 940 | Return: 2 percent
The automobile space has been the rank outperformer in the recent rally and TVS Motor is one of the biggest contributors over the last two months. The stock price has zoomed more than 50 percent in a quick succession.
The trend remains strongly bullish but before entering a four-digit league, the stock prices can undergo some profit-booking due to extreme overbought condition of multiple indicators.
Purely with a trading view, we expect some profit-booking in the coming week.
Traders are advised to sell on a bounce for a near-term target of Rs 940. The strict stop-loss needs to be placed at Rs 972.
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