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Last Updated : Oct 01, 2018 08:56 AM IST | Source: Moneycontrol.com

Market in a selling frenzy, wait for Nifty to cross 11,171 to take a long-term call

Strong bear grip accompanied by high VIX implies we are closer to a selling climax in the market.

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Shabbir Kayyumi

Nifty closed below all short-term moving averages, 5-DMA (11,000), 20-DMA (11,335) and 50-DMA (11,344) putting the market in a strong bear grip.

The strength of bear can be seen from the fact that market opened gap up consecutively for last three trading sessions but on each of these sessions, it closed sharply lower.

India VIX is trading at the highest level of the week around 17.00 and gained almost 10% in last week along with fall of prices implies higher volatility in the market with a bearish bias.

Interestingly, India VIX is making higher high almost since last 5 weeks, but it’s now heading closer to its short-term resistance of 19. And VIX always exhibits mean reversion.

Strong bear grip accompanied by high VIX implies we are closer to a selling climax in the market.

In terms of levels, strong upward sloping trend line on the weekly time frame and 200-DMA around 10,770 levels are likely to provide support to prices and immediate trading range would be 11,170 on higher side and 10,770 on the lower side.

At the same time, occurrence of a double bottom with positive divergence on the lower time frame, suggests fall can stall on lower levels.

On the higher side, lower time frame downward sloping trend line breakout will be only above 11,170. One should selectively start buying around 10,770 but an aggressive trader should wait for Nifty to cross 11,171 before taking a long view of the market.

Bank Nifty remains the weak pocket of the market. It is now firmly below its 200 days moving average and the price pattern is still not showing signs of bottoming out possible awaiting RBI credit policy ahead.

Trade Recommendation

ITC- : BUY | Buy Range: Rs 287-290 |Target Rs 335 | Stop Loss Rs 267 | Upside 16%

Selling seems to be absorbed by buyers after giving 50% correction from the peak of 323 marks. Stock is bottomed out near 50% Fibonacci retracement of the entire upward swing from 259 to 323 levels which is supportive for the Bulls. Emergences of morning star near the same suggest reversal in the coming sessions. Currently, it is retesting its previous neckline of cup and handle pattern on weekly chart which is around 288 levels. Strong support is seen near 280-285 zones where 61.8% Fibonacci retracement is located of the same upward swing. Buy around 290 with stop loss 267 for the target of 335.

NTPC - BUY | Buy Range: Rs 160-162|Target Rs 186| Stop Loss Rs 149| Upside 15%

Stock seems bottomed out at the levels 149 marks from that levels it gave breakout of double bottom, surged higher. Currently, Inverse Head &Shoulder is emerging on daily chart in which right shoulder is still pending. But from current levels risk and reward ratio is looking favorable. Indicators and oscillator are also conducive for the price action. One can take long position around 162-160 with stop loss of 149 for the target of 186 levels.

ICICI BANK: BUY | Buy Range: Rs 305|Target Rs 345| Stop Loss Rs 285| Upside 13%

After giving a decent fall, scrip seems to be bottoming out near its channel support line. It found a base near 50% Fibonacci retracement of the upside move from 266 to 346.80 which is giving a hope to Bulls for making long position in the scrip. 200 DMA is seen around 305 levels which is key support. Weekly chart is showing parity with its historical levels. Oversold stochastic is also lending support to its price action. One can go long around 305 levels with the SL of 285 for the target of 345 marks.

MGL - BUY | Buy Around: Rs 800 |Target Rs 900| Stop Loss Rs 755| Upside 12.5%

Scrip has given a sharp fall after hitting a peak of 986.80 and seems to be halting its downswing as it has found a strong base near the levels of 790-800 levels where congestion zone is seen. Positive divergence is seen in RSI and occurrence of double bottom price pattern indicates upside move. Positive crossover in MACD & declining histogram imply positive move on northward side. Buy around 800 with stop loss of Rs755 for the target of Rs 900 levels.

Disclaimer: The author is Head - Technical & Derivative Research, Narnolia Financial Advisors. The views and investment tips expressed by investment expert 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.
First Published on Oct 1, 2018 08:56 am
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