Nandish Shah
Nifty plunged 314 points, or 3.4 percent, ignoring positive global cues as special economic stimulus measures failed to cheer the market.
The government’s decision to extend the lockdown till May 31 marred the sentiment further. Bank Nifty continued its underperformance as compared to Nifty as it nosedived 6.7 percent to close at the lowest level since April 3, 2020.
The trend for the Nifty turned bearish as it broke the narrow range of the last 10 trading sessions on the downside by closing below 9,040 levels.
Earlier support of 9,040 levels would interchange its role as resistance.
On the derivatives front, we have seen Call writing at 9,000 levels. Therefore, 9,000-9,050 levels would act as an immediate resistance going forward.
During the last couple of weeks, Nifty failed to surpass the resistance of 50-DMA. At present 20 and 50 DMA, both are placed almost at the same levels at 9,250. This level will act as a far resistance.
As far as support is concerned, it is placed around 8,700 level, which is 50 percent retracement of the entire rise from 7,511 to 9,889.
Short-term trend has turned bearish as Nifty has closed below the important support level of 9,040.
The trend for Nifty will remain bearish until it closes above 9,050 levels. Far resistance is seen around 9,250 levels.
Therefore, our advice is to remain bearish for the market with the stop loss of 9,050 levels.
Immediate support stands around 8,700 level. Any close below this level would result in the further unwinding of positions which may drag Nifty to even 8,500 levels.
Here are three stock recommendations for the next 3-4 weeks:
Lupin | Buy | LTP: Rs 855 | Target price: Rs 920 | Stop loss: Rs 820 | Upside: 8%
The primary trend of the stock is positive where it is trading above its 200-day DMA.
The stock is taking support at 20-day DMA since the last eight trading sessions. It is on the verge of giving downward sloping trendline breakout above Rs 860.
RSI Oscillator is placed above 60 levels while the MACD line is placed above the central line, indicating bullish set up for the stock.
Pharma as a sector is looking good for the short to medium term.
Bata India | Sell | LTP: Rs 1,279.90 | Target price: Rs 1,190 | Stop loss: Rs 1,340 | Downside: 7%
The stock has broken down from the downward sloping trendline, adjoining the lows of 19-March, 21 April and 06 May 2020 with higher volumes.
On the derivatives front, we have seen a build-up of short positions.
Oscillators and momentum indicators like RSI and MACD indicate weak set up for the stock on the daily chart.
The stock has broken out on the daily chart by closing below the trading range of the last fifteen days with higher volumes.
On the derivatives front, we have seen a build-up of short positions.
Auto as a sector is looking weak on the short-term charts. RSI Oscillator is forming negative divergence on the daily charts.
(The author is Technical Research Analyst at HDFC Securities)
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.
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