The whole eight percent rally seen after this announcement has fizzled out. This does not augur well for overall market breadth and signals further bearishness in midcaps and smallcaps
The Nifty has been falling for six consecutive sessions. Last week, it breached the low of the 'Doji' candle formed on September 27, which has bearish implications.
From the high of 11,695, the Nifty has fallen almost five percent towards 11,113. It has now fallen below its 100 and 200-DMA.
The Nifty Smallcap Index has breached the level last seen on September 19, the day before the corporate tax cut was announced.
The whole eight percent rally seen after this announcement has fizzled out. This does not augur well for overall market breadth and signals further bearishness in midcaps and smallcaps.
The Nifty has retraced more than 50 percent of its entire upswing seen from 10,670 (bottom on September 19) to 11,695 (on September 23). However, its 50-DMA placed at 11,087 has not yet been breached and can act as support.
The 200-DMA placed at 11,264 is likely to act as a key resistance level. To conclude, the way the market has been moving recently, most of the bulls must have lost hope of a resumption in the uptrend.
This week, we expect the markets to retrace some of the losses seen in the last week, but at the same time we do not expect the recent highs to be taken out in the short term.
11,000-11,040 Nifty is the crucial level to watch out for. Any level below 11,000 would aggravate the bearishness in the market, which would raise the probability of breaching the previous bottom of 10,637 registered in August.
Here is a list of top three stocks that could return 7-9 percent in the next three-to-four weeks:
Muthoot Finance: Buy| LTP: Rs 670| Target: Rs 720| Stop-Loss: Rs 635| Upside 7.5%
In the month of September 2019, the stock broke out from the previous 5 month’s consolidation range.
The primary trend of the stock has been bullish and has been hovering around its all-time high. The moving average and Oscillator setup is bullish on the weekly as well as monthly charts.
Considering the technical evidence discussed above, we recommend buying the stock at CMP for the target of Rs 720 and keep a stop loss at Rs 635 on a closing basis.
Lupin: Sell| LTP: Rs 668| Target: Rs 610| Stop-Loss: Rs 709| Downside 9%
The primary trend of the stock has been bearish as the stock has been forming lower tops and lower bottom formation.
The stock has reached the lowest level since May 2013. The recent price fall was witnessed along with a rise in volumes.
The stock is trading below all important moving average parameters. Considering the technical evidence discussed above, we recommend selling the stock at CMP for the target of Rs 610, and keep a stop loss at Rs 709 on a closing basis.
Bank of Baroda: Sell| LTP: Rs 87.25| Target: Rs 80| Stop-Loss: Rs 92| Downside 8%
The stock has been forming lower tops and lower bottoms. The moving average and Oscillator setup is bearish on the daily and weekly charts.
The PSU Bank Index has seen a breakdown on the weekly charts and remained underperformer. The stock has recently breached 6 month low.
Considering the technical evidence discussed above, we recommend selling the stock at CMP, for the target of 80, and keep a stop loss at Rs 92 on a closing basis.
(The author is Technical and Derivative Analyst at HDFC Securities)Disclaimer: The views and investment tips expressed by investment experts 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.The Great Diwali Discount!
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