Sameet Chavan, Chief Analyst-Technical and Derivatives at Angel One
Overall, the global cues were a bit favourable on Monday morning and hence after a long break, markets opened with a decent upside gap to test 18,000. However, within a few minutes of trade, all these gains just disappeared and in fact, we went on to slide below 17,850.
The market was not done with its twists and turns as we saw strong buying interest at lower levels to pull the market higher. The positive momentum gained some pace post the mid-session to surpass the morning high. This was followed by two days of consolidation in a small range. On the weekly expiry day, we had a soft opening on the back of some nervousness seen in major global peers. In fact, in the initial hour itself, the weakness extended in some of the heavyweight pockets.
This led to breach of 17,900 first and then after a decent consolidation, Nifty went on to even test the 17,800 mark. At the stroke of the penultimate hour, the expiry factor started playing out and this time it fortunately favoured the bulls as we witnessed a smart recovery towards the end to trim some portion of losses.
This was followed by a complete opposite action on Friday as we witnessed a gap up opening first and then due to sustained buying in some of the heavyweights, Nifty went on to reclaim the 18,100 mark at the close. The market seems to have trapped in a range and this week, although point wise we gyrated within 300 points, it's hardly one and half a percent range for the Nifty. So we would rather call it a consolidation in the range of 17,800 – 18,100.
For the coming week, 18,200 – 18,350 is to be seen as a crucial range and till the time we do not surpass it convincingly, we are not completely out of the woods yet. In fact, it would be too early to comment on it; but we can clearly see a bearish formation of 'Head and Shoulder' being in process on the daily chart of Nifty. The neckline support is around 17,700 – 17,600, which if gets broken, we could see difficult days for market in the short run. With reference to our recent cautious stance on the market, we will not be surprised to see it happening soon, if we fail to go beyond the mentioned zone of 18,200 – 18,350 in the forthcoming week.
The main reason for us to continue with the cautious stance is the formation of 'Shooting Star' pattern on monthly chart. As long as we do not break the high of the candle, it can prove its significance anytime. Hence, we reiterate on avoiding aggressive longs and even if one wants to follow stock specific moves, needs to be very selective.
Here is one buy call and one sell call for next 2-3 weeks:
L&T Infotech: Buy | LTP: Rs 7,243.25 | Stop Loss: Rs 6,950 | Target: Rs 7,500 | Return: 3.5 percent
This stock has been witnessing its dream run over the past few months. In July, stock prices formed a decent base around Rs 4,000 which was then followed by a strong price volume breakout. After this it never looked back as we could see it now surpassing the Rs 7,200 mark without giving any major correction all this while.
With Friday's strong upsurge, we can see resumption of its higher degree bullish cycle. Since it has already moved up a bit, we recommend buying on a minor pullback towards Rs 7,200 – Rs 7,150 for a short term target of Rs 7,500. The stop loss can be placed at Rs 6,950.
Bajaj Auto: Sell | LTP: Rs 3,635.05 | Stop Loss: Rs 3,790 | Target: Rs 3,500 | Return: (-3.7 percent)
Recently most of the auto stocks did extremely well but two-wheeler stocks like Hero MotoCorp and Bajaj Auto did not participate at all. Now with most of the counters undergoing a corrective phase, these stocks have broken their key multi month supports.
For Bajaj Auto, Rs 3,650 has acted as a sheet anchor on multiple occasions in last few months. On Friday, prices not only slid below it, but also went on to confirm a breakdown on a closing basis.
One can look to sell on a bounce around Rs 3,660 - Rs 3,680 for a target of Rs 3,500. The strict stop loss to be kept at Rs 3,790.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.