Nifty fell 0.7 percent in the week ended June 18, snapping its winning streak of the last four consecutive weeks. Last week, we saw a lot of churning in sectors where defensive spaces like FMCG and IT showed some strength.
Metals had a terrible week as we saw an almost 7 percent cut in the index. Despite some recovery, the banking index ended the week with a loss of over a percent. Nifty Midcap 50 index saw a meaningful correction
of over 3 percent during the week.
The kind of price action we saw last Friday, is like a glass half full or half empty.
While the key indices managed to hold crucial levels, the market was struggling at higher levels and the mid-cap index started to display some signs of exhaustion.
In our previous weekly commentary, we had mentioned how the Nifty Midcap 50 has reached a cluster of various Fibonacci ratios and last week’s correction has clearly validated our assumption.
We are now in the monthly expiry week and looking at the overall positioning of our market, we expect the volatility to increase a bit.
If we take a glance at the weekly chart of Nifty, we can see two back-to-back small body candles and last week’s formation resembles a ‘hanging man’ pattern.
Such a pattern requires confirmation in the form of breaking its low. Hence, it would be interesting to see how things pan out in the first half of this week.
As far as levels are concerned, 15,820 – 15,880 are immediate resistances, whereas 15,550 – 15,450 – 15,400 are support levels.
We advise traders to lighten up positions at higher levels and it is better to go one step at a time for the time being.
Here is one buy and one sell call for the next 2-3 weeks:
HDFC Life Insurance Company | Buy | LTP: Rs 709.20 | Target price: Rs 746 | Stop loss: Rs 681 | Upside: 5%
This stock bucked the trend in the second half of the week gone by, when the broader market witnessed a decent price correction.
Towards the end of the week, it started to accelerate to close beyond its recent hurdle of Rs 700 – 705.
The weekly chart too confirmed the highest weekly close in the last three months.
RSI-smoothened, on the daily chart, has crossed the 70 mark, which we believe should provide the impetus to the next up move.
UPL | Sell | LTP: Rs 808 | Target price: Rs 765 | Stop loss: Rs 849 | Downside: 5%
This counter was one of the biggest losers on Friday. We could see this stock sliding and closing below the crucial support of the 20-day exponential moving average on the daily chart after nearly two months.
On the weekly timeframe, this led to the confirmation of the shooting star pattern which does not bode well for the bulls.
Considering these pieces of evidence, further profit-booking in this stock cannot be ruled out.
We recommend selling on a bounce towards Rs 820 – 825.
(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.