In case the Nifty50 slips below it, we may see an extension of profit booking towards 11750 – 11700.
The market has seen a stupendous run over the past couple of months without any major correction. Last week, we finally saw some respite to this ongoing optimism.
Traders’ fraternity looked disappointed after the Reserve Bank of India (RBI) maintained its "status quo" stance on its repo rate. This resulted in a decent decline on the following day as well to register the weakest week in the last two months.
Clearly, last week’s tail-end correction was a bit unexpected to us. But, since the outcome from the policy was not on expected lines, such a reaction was evident.
The index is now standing at a crucial juncture and the trend for the forthcoming week would be decided by the price action seen in the first couple of days.
For the Nifty, the sacrosanct support is placed in the zone of 11,883 – 11,850. In case the Nifty50 slips below it, we may see an extension of profit booking towards 11,750 – 11,700.
But, by no means, this could be termed as a trend reversal; rather we would construe this as a healthy correction before resuming the uptrend.
On the other side, if the Nifty manages to hold the support zone and start trading beyond 12,000, it would negate the possibility of extended correction and then the index could continue its upward trajectory towards 12,100 – 12,160.
Traders are advised not to get carried away by such in-between hiccups, rather use such declines to add quality propositions to the portfolio.
Since the selling was seen across the board, there is nothing much to comment on the sectoral front. Despite this, we continue to like the Pharma and Metal space, which we believe are likely to provide potential trades.
Here is a list of top two stocks which could give 4-5 percent return in the next 3-4 weeks:
Kotak Mahindra Bank: Buy | LTP: Rs 1,674 | Target: Rs 1,750 | Stop Loss: Rs 1,630 | Upside 4 percent
After consolidating in a broad range of Rs 1,540-1,640 for the last two months, the stock prices have finally broken the range on the upside to confirm a rectangular channel bullish breakout.
On Friday, when the broader markets witnessed a sell-off, this counter gave a bullish breakout with a good increase in volume indicating strong inner strength.
In addition, prices have closed above the higher range of the Bollinger Band suggesting strong trending up move in the near term post its recent sideways consolidation.
Thus, we recommend buying this stock at the current levels for a target of Rs 1,750 over the next few days. The stop loss should be fixed at Rs 1,630.
Larsen & Toubro: Buy | LTP: Rs 1,290 | Target: Rs 1,350 | Stop Loss: Rs 1,260 | Upside 4.6 percent
This stock has not participated in the current Bull Run and has now reached its long term support zone placed at Rs 1,280 – 1,290 levels.
In the recent past, this zone acted as a strong demand zone resulting in a strong bounce-back; in the month of May.
The stock prices rallied from the levels of Rs 1,290 to Rs 1,586 levels, whereas in September, the stock prices rallied from Rs 1,290 to Rs 1,550 levels.
With prices reaching the demand zone, and oscillators placed in the oversold zone, we are witnessing a bullish reversal pattern on the daily chart known as ‘Stick Sandwich’, which hints for a strong bounce back in the near term.
Looking at the favorable risk-reward ratio, traders are advised going long for a target of Rs 1,350 over the next few days. The stop loss should be fixed at Rs 1,260.
(The author is chief analyst-technical & derivatives, Angel Broking)Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are his 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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