Investors should note that there is limited risk-reward for shorting at current levels as the prices have entered the oversold zone, and the current momentum indicators are developing positive divergence pattern which hints at a pullback rally, Manav Chopra, CMT | Head Research- Equity, Indiabulls Ventures, said in an interview to Moneycontrol's Kshitij Anand.
Edited excerpts:
Nifty seems to be in the bear grip. Is it time to go short on the index? If yes, what are the target and stop loss which one should keep in mind?
The index has observed a series of declines and is now nearing its key long-term support levels. There is 200-DMA around the 10,800-10,750 along with the 50% retracement zone which are likely to provide a cushion in the case of declines.
There is limited risk-reward for shorting at current levels as the prices have entered the oversold zone. The current momentum indicators are developing positive divergence pattern which hints at a pullback rally.
One should look for a reversal formation near the mentioned support zone of 10,800-10,750 levels.
How are Infibeam, Yes Bank looking on technical charts?
Infibeam had shown early signals of an exhaustion setup which was witnessed by a sharp decline. The stock not only breached all support zones but has also hammered the overall structure and is unlikely to recover in the near future.
We would recommend traders and investor to avoid any entry into this.
Yes Bank, on the other hand, has breached the December’16 lows backed by a huge spike in volumes. Usually, such formation in the large-cap stock leads to a selling climax formation which is currently being witnessed.
Yes Bank has tested key support levels of Rs 165 and needs some base formation around these levels for clarity. Traders can look to buy this in a phased manner near the mentioned support levels keeping a positional stop loss at Rs 140 on a closing basis.
How is market likely to trade in October series? Do you expect more pain?
The markets would continue to witness a spike in volatility. There will be stiff resistance for Nifty around the 11,150-11,200 levels on the upside and Bank Nifty is likely to face crucial hurdles at 25,650.
Since both the indices have witnessed sharp decline and are at the oversold levels, one needs to see a close above the resistance zone for any reversal in the trend.
The current data suggests that 10,750-10,800 is the support for Nifty and Bank Nifty support is placed around the 24,750-24,950. If the above-mentioned levels are held for a week, then a short-term bounce cannot be ruled out.
What should be the right strategy for investors in small & midcaps which have seen destruction in value?
The Mid and Smallcaps will continue to witness declines as the index has also breached its June’18 support levels. The breadth for midcap and smallcap is weak and one can witness further sell-off in near future.
Traders need to avoid this space for the next few quarters until there is strong base formation.
What is your call on rupee? Do you see some more weakness for the currency in October?
Rupee is likely to consolidate in the near term and is unlikely to breach the 73.1 levels. There is strong support around the 71.5 and is likely to be in a range of 71.5-73.
This could be a trigger for the market to bounce from the oversold levels. Rupee has also witnessed negative divergence which also hints at strengthening in the near term
Top three stocks which investors can look at for the coming week for a minimum holding period of 6 months?
M&M: Buy| LTP: Rs 860.70| Target: Rs 1,150| Return 33%
The price formed a bullish Hammer candlestick pattern at the support zone and the RSI took support at the long-term rising trendline which indicates the high margin of safety at current levels. Investors can go long in the stock with a target of Rs 1,150.
Cipla: Buy| LTP: Rs 653| Target: Rs 825| Return 26%
The stock price of Cipla has breached its 8-month consolidation which confirms a trend reversal and resumption of the original trend. We expect prices to exceed its March’15 highs. Traders can go long in Cipla with a target of Rs 825.
UBL: Buy| LTP: Rs 1363| Target: Rs 1,600| Return 17%
The monthly charts of UBL have formed multiple bullish reversal candlesticks patterns near the support line which further validates the bullish setup in the stock. Chart patterns suggest that new highs are in the making.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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