Sameet Chavan, Chief Analyst-Technical and Derivatives at Angel One
The market had an excellent start to the week on Monday owing to favourable global cues. However, it failed to sustain at higher levels as the early morning gains just disappeared in the first half. During the remaining part of the day, the Nifty kept flirting around the equilibrium point.
Eventually, in the absence of any momentum, the Nifty ended the session a tad above the 18,100 mark. As the week progressed, the market became a bit nervous and hence, we could see it grinding lower gradually by breaking minor supports on the way through. The selling aggravated on Thursday and, in the process, we first breached 17,800 and then went on to slide below the crucial support of 17,700. Due to a modest recovery in the latter half, the bulls managed to defend this level on a closing basis.
During the week, the Nifty did correct by nearly a couple of percent, which certainly cannot be considered as a major damage. Also, it did close above the key support on a weekly basis but the way overall things are positioned, we will not be surprised to see it surrendering (17,700) in the first half of the forthcoming week itself.
Since the last few days, we have been mentioning the ‘Head and Shoulder’ pattern on the daily chart of the Nifty which was in process. After today's close, the final (right) shoulder of this pattern is completed and prices are placed exactly at the 'Neckline' point of the same. A sustainable move below 17,700 (which seems likely) would activate the pattern and as a result of this, we could see a fresh leg of correction in coming days.
After this, next levels to watch out for would be 17,450 and 17,200, where one needs to reassess the situation. On the flip side, if the Nifty manages to hold 17,700 and move higher first, then 18,000–18,200 are to be considered as strong hurdles which, as of now, we do not expect to get surpassed in the near future.
The major culprit in this week's correction was the continuous weakness in banking and metal counters. Although the banking index is nearing its strong support zone, we do not expect any major bounce back in this space. Apart from this, the broader market looked a bit tentative today and the way it's closed today, things do not augur well for the bulls.
To summarise, we advise traders to remain light which we have been advocating of late and even if one wants to accumulate stocks with a broader perspective, one needs to be a bit patient as we expect some reasonable prices to come in next few days.
Here are two sell call for next 2-3 weeks:
BPCL: Sell | LTP: Rs 405.30 | Stop Loss: Rs 416 | Target: Rs 388 | Return: (-4.3) percent
This has been the weakest stock within the 'oil marketing' companies since last couple of months. With Friday's correction, the stock prices finally sneaked below Rs 412, which acted as a sheet anchor on numerous occasions recently. Hence, price wise, we can observe a convincing breakdown in this stock on a daily time-frame chart.
Now although it reached its '200-day SMA' (simple moving average), we expect the corrective move to continue in the forthcoming week. We recommend selling in a range of Rs 407 – Rs 409 for a short term target of Rs.388. The stop loss can be placed at Rs.416.
Ashok Leyland: Sell | LTP: Rs 139.60 | Stop Loss: Rs 145.20 | Target: Rs 134 | Return: (-4) percent
Selective 'automobile' stocks did extremely well in last couple of months and this is clearly one of them. Due to the steady up move, the stock prices reached its highest level in last three years. Unfortunately, it failed to sustain at higher levels and in last three sessions, prices took a U-turn in the downward direction.
On Friday, we could see this stock sliding below '20-day EMA' (exponential moving average), which is a first sign of trend reversal. Traders can look to short this counter on a small bounce towards Rs 141–142 for a short-term target of Rs 134. The stop loss can be placed at Rs 145.20.
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