In the early sessions of the last week, markets took a smart U-turn, tracking positivity across the globe.
Although new highs were hit, it was not convincing. The main reason behind this was that Nifty, Nifty Bank and Nifty Midcap 50 were making new highs with the 3-points negative divergence in the RSI-smoothened oscillator on the daily chart.
Such divergence with the 3 points is generally considered as a sign of caution and hence, repeatedly we advise not getting carried away by the euphoria.
Now, although Nifty has not broken any major supports, the development in Nifty Bank does not look encouraging at all.
In fact, the entire banking and financial space was the main culprit behind last Friday’s correction as they took a solid knock.
To be specific, Nifty Bank has confirmed a double top pattern on the daily chart and has broken its important swing low with ease.
The weekly chart of the same exhibits the confirmation of the ‘long-legged Doji’ pattern.
For Nifty, the important support to watch out for would be 14,222, below which, the recent bullish structure will get distorted to extend the correction towards 14,000–13,800 levels.
On the higher side, 14,500–14,632 would be seen as immediate hurdles.
Historically, it is rare to see a major trend reversal ahead of any mega event. Hence, it would be interesting to see how things pan out this week as the Union Budget is around the corner.
Looking at the price development, it does not look encouraging. All eyes should be on the financial space because if further weakness has to come, it would certainly be led by this space.
We continue to advise staying light on positions and one should ideally avoid creating leveraged positions ahead of the Budget, especially in high beta counters.
If any significant correction comes, it would be a great opportunity to accumulate quality propositions in a staggered manner.
Here is one buy and one sell call for the next 3-4 weeks:
Titagarh Wagons | Buy | LTP: Rs 55.70 | Target price: Rs 74 | Stop loss: Rs 44 | Upside: 33%
The way this stock has moved in the last 3–4 months, it looks quite promising. Irrespective of Budget, we like this counter at the current level and despite some tentativeness in the broader market, we recommend this counter.
The stock has traversed its 20-day EMA on the monthly chart for the first time after March 2018.
It is accompanied by the classic ‘bullish crossover’ in the combination of two key moving averages i.e. 5 and 20.
Hence, the mild profit-booking in the current month should ideally be used as a buying opportunity.
Traders are advised to accumulate this stock on a decline around Rs 53 to Rs 49.
IndusInd Bank | Sell | LTP: Rs 893 | Target price: Rs 860 | Stop loss: Rs 935 | Downside: 4%
The entire banking space nosedived last Friday. This stock was holding well throughout the first half but it finally succumbed to the selling in some of its larger peers.
Due to this negative rub-off, we witnessed a decent correction in the stock, breaching a few key levels.
If we look at the daily chart, we can clearly see a breakdown from the important swing lows around Rs 918. It closed convincingly below its 20-day EMA.
If the sell-off continues in the market, this high beta name would probably see some serious correction. Traders can look to sell the stock on a bounce towards Rs 900 - 910.
(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.
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