Last week, Nifty fell below its recent swing low of 14,635 on a closing basis. This led to the confirmation of the first sign of trend reversal in the form of ‘lower top lower bottom’ on the daily timeframe chart.
The weekly chart had shown some exhaustion in the previous week as we observed fatigue around the strong resistance zone of 15,380–15,500, which is the 161 percent 'golden ratio' of the entire fall from January 2020 highs to March 2020 lows.
Looking at the price structure, we expect this correction to extend towards 14,200 – 14,000 levels first.
The level of 14,000 would be seen as crucial trendline support and a breach of this would open up further space towards 13,700–13,500.
We would be closely observing how the index behaves around 14,000 this week. The short-term tide has turned downwards and the view will remain intact as long as 15,200 is not broken.
On an immediate basis, 14,750 – 14,920 are seen as stiff hurdles. The larger degree uptrend is still very much intact.
For a long time, the market has not seen any major correction, so this should only be construed as a much-awaited profit-booking or a short-term corrective phase which is healthy in the long run.
Momentum traders should avoid aggressive or leveraged longs for a while; rather use decent declines to accumulate quality propositions.
Here's one buy and two sell calls for the next 2-3 weeks:
NTPC | Buy | LTP: Rs 107.05 | Target price: Rs 118 | Stop loss: Rs 94.50 | Upside: 10%
PSU stocks have been on a roll for the last couple of months and the way they are shaped up, they may perform well throughout this year.
NTPC is considered to be a slow-moving counter and has shown some interesting signs in the recent past.
Looking at the daily and weekly timeframe charts, we can see a good accumulation pattern getting developed over the last few months.
The stock is about to come out of the congestion zone and hence, we expect it to give a decent move in the coming weeks.
Since, the overall market look poised for some short-term correction, we advise accumulating this stock on declines around Rs 103–100 for a target of Rs 118.
Bajaj Finance | Sell | LTP: Rs 5,243.55 | Target price: Rs 5,080 | Stop loss: Rs 5,460 | Downside: 3%
The financial space mainly led the sell-off on Friday, and some of the NBFC stocks became the casualties in the hammering.
This stock had a gradual decline in the last couple of weeks but on Friday, with a nearly 5 percent cut, it finally broke down below its recent swing lows.
The momentum oscillators on the daily chart have turned downwards which may provide some pressure to the prices on any bounce back.
ICICI Bank | Sell | LTP: Rs 597.25 | Target price: Rs 564 | Stop loss: Rs 615.60 | Downside: 6%
Last week, this stock managed to lead from the front in a sharp recovery to pull the Nifty above the 15,000 mark. However, the follow-up buying was missing towards the fag end of the week which eventually resulted in a sharp decline on Friday.
The chart structure is very much similar to some of the other financial stocks. On the daily chart, we can see a bearish ‘1-2-3’ pattern with prices trading convincingly below the 20-day EMA.
(The author is Chief Technical & Derivatives Analyst at Angel Broking)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.