Sameet Chavan, Chief Analyst-Technical and Derivatives at Angel One
On 22 November, the SGX Nifty was indicating a pleasant start for the week in line with cheerful global peers. However, Indian equities did not open with the same positivity and in fact gave up all gains in the initial trades itself. As the day progressed, the selling augmented across the broader market to break all intermediate supports one after another. On Tuesday, after forming a low around 17,200, oversold markets recovered a bit over the course of three sessions. However, on Friday, the new variant of coronavirus haunted market participants across the globe and as a result, we had a massive gap down followed by aggrandised selling throughout the session to close tad above the 17,000 mark.
This week's sharp correction has clearly validated our recent cautious stance on the market. Considering the 'Shooting Star' on the monthly chart, we anticipated a formation of bearish 'Head and Shoulder' pattern on daily chart. The said pattern finally got confirmed on Monday after breaking the neckline level of 17,700. The moment our anticipation turned into reality, there was no ambiguity left. Although our initial target of 17,200-17,000 has been met, market is not done with its correction yet.
Considering the weekly chart, we will not be surprised to see it extending towards 16,500 - 16,200 in coming days. We do not want to sound too pessimistic, but this is what the price structure looks like at this moment. On the flip side, 17,200 - 17,400 are to be seen as immediate hurdles.
With a slightly broader view, if Nifty has to regain any strength, it needs to surpass 17,700 with some authority. Honestly this looks highly unlikely at current juncture as we expect lower levels to get tested first. The broader market too seems to have succumbed to this selling pressure and hence, one should not be in a hurry to do any kind of bottom fishing immediately.
Here are two sell calls for short term:
Motherson Sumi Systems: Sell | LTP: Rs 216.50 | Stop Loss: Rs 228 | Target: Rs 202 | Return: (-6.7) percent
It was certainly a difficult week for our markets as we witnessed a good broad based selling on the first and the last day of the week. This stock consolidated at the 200-day SMA (simple moving average) for 3-4 days; but on Friday, we finally witnessed a decisive breakdown from this sacrosanct support for the first time after 13 months.
Whenever we see any important support being breached after such a long time, the stock prices continue the downward trend for a while. We recommend selling around Rs 219 for a short term target of Rs 202. The stop loss can be placed at Rs 228.
Hindalco Industries: Sell | LTP: Rs 417 | Stop Loss: Rs 434 | Target: Rs 399 | Return: (-4.3) percent
Global markets are witnessing a strong sell off and whenever we see some uncertainty across the globe, the 'Metal' space is first one to react on it. In fact, our markets started correcting in last week and hence, metal counters were already experiencing that corrective phase.
On Friday, due to aggravated selling, Hindalco sneaked below its key support of Rs 435 on a closing basis. Considering the daily and weekly time frame charts, we expect the correction to extend in this counter.
Traders can look to short on a small bounce towards Rs 422 – 425 for a short term target of Rs 399. The stop loss can be placed at Rs 434.
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