Finally, the bears took charge of the domestic market as Nifty ended its winning streak during the week by correcting for three consecutive sessions.
So far during the week, the index has lost around 1 percent, but if we look at the entire series, the index has ended flat.
Apart from December 2019, the last three F&O series were in deep green, which means even that winning streak has been broken.
Nifty Bank index, too, is now trading with a loss of over 1 percent week-on-week (WoW).
On Monday, the eight-session streak of higher highs and higher lows was broken after Nifty started trading below 12,252. As a result, we witnessed selling in the market which dragged the index towards 12,100 odd levels.
Now, looking at the weekly and expiry-to-expiry chart of Nifty, it can be observed that the market is losing steam and the benchmarks have entered a consolidation phase.
For the coming days, 12,000–12,300 would remain the trading range for the market. Only a move above or below this range would now dictate the further trend.
On the upside, 12,300–12,400 could act as a hurdle for the index since that is the placement of a rising trend line.
Looking at the broader picture, we would like to draw the participants’ attention to an important observation that the weekly and monthly RSI of Nifty is witnessing a negative divergence. This suggests that one should keep booking profits at higher levels.
Here is one buy and two sell stocks for next 1-3 weeks:
InterGlobe Aviation (IndiGo) | Buy | LTP: Rs 1,321.95 | Target: Rs 1,440 | Stop loss: Rs 1,260 | Upside: 8.93%
Since September 2019, the stock has corrected from the peak of Rs 1,900 towards the recent low of Rs 1,300.
On the daily chart, we are witnessing a multiple-bottom formation at Rs 1,260. Historically, the stock has bounced from there.
In addition, we are witnessing a positive divergence in the daily RSI, which indicates the possibility of a bounce and the risk-reward ratio for going long looks very lucrative.
Reliance Industries | Sell | LTP: Rs 1,515.40 | Target: Rs 1,420 | Stop loss: Rs 1,600 | Downside: 6.29%
Since August 2019, the stock has seen a strong uptrend and has rallied significantly. However, the ongoing upside move seems to have been halted since the stock has started consolidating exactly near Rs 1,600, which is the 161.8 percent retracement level of the previous move.
Even on the daily chart, there is a double-top formation, which supports an over-bearish view. The placement of the daily RSI indicates a possibility of a correction in the coming sessions.
ICICI Bank | Sell | LTP: Rs 538.75 | Target: Rs 506 | Stop loss: Rs 554 | Downside: 6%
Since September 2019, the stock has seen a strong uptrend and has rallied substantially from the lows of Rs 390 towards the recent peak of Rs 550.
Now, on the daily chart, we are witnessing some consolidation in the stock, which indicates exhaustion.
The daily RSI has turned from the top of 75 and is again below 70, with a trend line breakdown.
The RSI-smoothened indicator on the daily chart has signalled a negative crossover after a very long time, and that too above 90 levels, which indicates profit booking.
(The author is Sr. Technical Analyst, IndiaNivesh Securities Limited)Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.