Nifty is expected to trade in range of 11,700-10,700 levels for the month of October 2019 with mixed bias.
Nifty started the month of September on a flat note. However, smart recovery based after news of corporate tax reduction helped the index close on a strong note. Nifty gained around 450 points or 4.09 percent to close at 11,474 level. During the month of September, auto, banking, consumer durable capital goods, metal, oil&gas, and power sector have outperformed and supported to Nifty while healthcare, realty and IT have closed on negative note.
On the monthly chart, the index has formed a sizable bullish candle, retracing its past three months down move (12,103-10,637) by 61.8 percent Fibonacci level on closing basis. This Fibonacci retracement level (11,543) is also coincides with Up-Sloping Channel's resistance zone of 11,550 levels which remains a crucial supply zone to watch for in near term. It was the second consecutive month that index continued to resists its Up-Sloping Channel's on closing basis. At current levels, the monthly chart structure indicates Nifty is losing strength on rallies on medium/long-term chart. However, on short-term scale, Nifty is expected to consolidate within range of 11,700-10,600 levels.
Currently, Nifty is trending upwards on short-term charts and sustaining above its important short term moving averages 20 DMA and 50 DMA and have turned upwards along with prices signifies rising strength and upward momentum in short term. On the daily chart, moving average 50 DMA penetrate 200 DMA downward in month of September and this crossover is intact, this moving average crossover known as 'Death Crossover' which indicates long term trend bearish and we may see further selling pressure action in short to medium-term.
Nifty continues to remain positive on short term basis however negative divergence of prices and Relative Strength Index on monthly charts is still intact.
Chart pattern indicates that if Nifty sustained below 11,050 levels on closing basis, then it may witness further supply pressure and it can slide further towards 10,900-10,800-10,600 levels in near term. However, 11,600-11,700 levels are likely to act as resistance in the short-term. Any decisive weekly close above this resistance zone will cause for short covering and fresh long participation. The daily, weekly, monthly and quarterly Strength Indicator- RSI and momentum indicator Stochastic both are placed negatively along with negative crossover, which represents bearish sentiments in the short term.
Nifty is expected to scale in a broad range and is likely to move in both the directions in near term while medium to Long term trend continued to be remain bearish. We expect Nifty to remain volatile with negative bias in near term. Nifty is expected to trade in range of 11,700-10,700 levels for the month of October 2019 with mixed bias. Preferred strategy would be to buy bullish stocks in staggered manner on dips near to their major support levels.
Here is list of three stocks which could give 3-16 percent return in near term:
Century Plyboards: Buying Range Rs 164-160 | Stoploss: Rs 154 | Target: Rs 178-182 | Return: 14-16 percent
In the daily chart, stock price is moving in 'Up-sloping Channel' making higher top higher bottom indicating bullish sentiments in near term. This breakout has accompanied with increase in volumes which supports bullish sentiments ahead. The daily as well as weekly strength indicator RSI and the momentum indicator Stochastic both are in positive territory which supports upside momentum to continue in near term. Stock price is sustaining well above its 20, 50 and 100 day SMA which supports bullish sentiments ahead.
Grasim Industries (October Futures): Selling Range Rs 660-672 | Stoploss: Rs 685 | Target: Rs 628-615 | Return: 3-5 percent
In the weekly chart, stock price has decisively broken down from its 'Multiple support' levels of Rs 690-685 on closing basis and sustaining below the same. This breakdown is accompanied with increase in volumes which supports bearish sentiments ahead. The daily as well as weekly strength indicator RSI and the momentum indicator Stochastic both are in negative territory which supports downside momentum to continue in near term. Stock price has broken its 20, 50 and 100 day SMA which supports bearish sentiments ahead.
Dabur (October Futures): Selling Range Rs 428-434 | Stoploss: Rs 440 | Target: Rs 413-408 | Return: 5-6 percent
In the daily chart, stock price has decisively broken down from its 'Multiple support' levels of Rs 435-430 on closing basis and sustaining below the same. This breakdown is accompanied with increase in volumes which supports bearish sentiments ahead. The daily as well as weekly strength indicator RSI and the momentum indicator Stochastic both are in negative territory which supports downside momentum to continue in near term. Stock price has broken its 20 and 50 day SMA which supports bearish sentiments ahead.
(The author is DGM - Research (Head Technical & Derivatives Research) at Axis Securities Limited)Disclaimer: 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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.