Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel One
We had a shaky start on Monday as the Nifty tumbled more than 300 points within a blink of an eye in opening trades. Fortunately, the nerves settled down thereafter and the benchmark managed to recoup all losses at the close. This was followed by an exact replica of Monday where Nifty corrected sharply towards the fag-end of the session to sneak below the 17,000 mark.
However, once again the bulls managed to come back strongly which was supported by the cooling off in the global peers. With a steady recovery, the Nifty almost retested 17,500 during the early trades on Friday. But bears were not willing to give up as they once again showed their dominance at higher levels to erase major portion of weekly gains.
Overall this week, our market managed to close in the positive terrain; but it was certainly a challenging week for both counterparties. The market was clearly unsure of its direction for the most part of the week. If we look at it from a technical point of view, the market is respecting the levels precisely. At the beginning, the Nifty started rebounding after reaching the price target of 'Head and Shoulder' pattern of 16,800 and on Friday, it became nervous after nearing a stiff resistance zone of 17,500–17,600.
Direction wise, we continue to remain cautious and there is no doubt we are still in a 'sell on rise' kind of market. This view will remain intact as long as the Nifty does not surpass 17,900 which is the confluence point of two key trend lines. Also sooner or later we expect the recent low of around 16,800 is to be breached soon; but it will happen immediately or after some more consolidation in the range of 16,800–17,500; we need to assess the situation in the coming week.
Meanwhile, traders can continue with a stock-specific approach and we may see trades on both sides if the Nifty remains in a consolidation mode. But it would be a prudent strategy to keep booking timely profits and considering the volatile nature of global markets, carrying aggressive bets overnight should be strictly avoided. As far as levels are concerned, 17,350 – 17,500 – 17,600 are to be considered as immediate hurdles; whereas on the flipside, 17,000 – 16,800 should be treated as a cluster of support.
Here is one buy call and one sell call for next 2-3 weeks:
ONGC: Buy | LTP: Rs 145.90 | Stop Loss: Rs 139 | Target: Rs 152 | Return: 4.2 percent
This stock had a spectacular run from mid-August lows (Rs 108.50) to Rs 170 plus levels in merely 8–9 weeks. In this move, the volume activity rose substantially, indicating tremendous buying interest in this counter.
However, after the initial part of the week, the stock prices slipped into a corrective mode. The price decline has been gradual in nature and in the process, formed a 'Downward Sloping Channel' where both ends of this pattern were tested on a multiple occasions.
Now stock prices have reached its cluster of support where multiple technical evidences converge. Hence, there is a possibility of the recent corrective phase getting completed and the stock may move upwards from here. We recommend buying around Rs 143 for trading target of Rs 152. The stop loss can be placed at Rs 139.
Sun Pharma: Sell | LTP: Rs 751.80 | Stop Loss: Rs 772 | Target: Rs 735 | Return: (-2.2) percent
This pharma giant has always been a rank outperformer in this space. In fact, after the June highs, most of the peer counters corrected sharply but this stock stood firm and kept marching upwards.
However, recently when all these beaten-down pharma stocks started rebounding, this stock showed some divergence. Mostly, heavyweights within this space move hand in hand but this time we are seeing this unusual divergence.
During the week, stock prices slipped below its daily ’89-EMA’ (exponential moving average) which had provided rock solid support on numerous occasions of late. Thus, we expect this weakness to persist in the counter.
One can look to short in a range of Rs 757 – 759 for a near term target of Rs 735. The stop loss can be placed at Rs 772.
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