If Nifty doesn’t manage to take support at 11500 then it could correct towards levels of 11,350 levels as well on the back of further selling.
The Nifty50 index was dragged sharply this week on the back of liquidation of long positions. On the derivative front, the recent development in data is pointing towards cautiousness and is indicating the probability of further profit booking.
Hefty call writing and put unwinding has been witnessed in recent trading sessions where call writers were seen active in 11,600, 11,550 & 11,500 strikes indicating limited upside.
This clearly indicates lack of buying interest and discomfort in the market. The levels of 11,500 will remain crucial for this week as indicated by option open interest concentration.
If Nifty doesn’t manage to take support at 11,500 then it could correct towards levels of 11,350 levels as well on the back of further selling.
On bounceback, the index will face strong resistance at 11,600-11,650 levels. The weekly options open interest concentration at the 11,600-strike calls held with more than 28 lakh shares; while among weekly and monthly put options, the 11,500-strike combinable holds with the open interest of nearly 32 lakh shares.
This clearly indicates that call writers are much aggressive than put writers, which may limit any sharp upside in prices.
Here is a list of top three stocks which could give 7-14% return in the next 1 month:
Chennai Petroleum Corporation: Sell| Target: Rs 230| Stop Loss: Rs 260| Downside 7%
On the daily and weekly charts, the stock has been consistently maintaining below its long-term moving averages. However, on the daily charts, the stock is consolidating in a range of Rs 270-250 from the last four weeks and this week it finally gave a breakdown below the key support levels of Rs 250 along with heavy volumes which suggest short build up into the prices.
Moreover, the stock has also given a breakdown below the neckline of the Head & Shoulder pattern on a shorter time frame, which is again a bearish signal for the prices moving forward.
Traders can take a short position in the range of Rs 248-245 for the downside target of Rs 230 levels and a stop loss above Rs 260.
Blue Star: Buy| Target: Rs 815| Stop Loss: Rs 680|Upside 11%
On the broader charts, the stock has been maintaining its uptrend and is trading in a rising channel. It has been forming a higher high and higher bottom pattern.
In the recent past, it has taken support at its long-term moving average on the daily interval and took a U-turn thereon to once again reclaim Rs 700 levels.
At the current juncture, the stock has formed a rounding bottom pattern and has given a fresh breakout along with positive divergence on the secondary oscillators with marginally higher volumes.
Traders can accumulate the stock in a range of Rs 730-740 for the upside target of Rs 815 levels and a stop loss below Rs 680.
Mold-Tek Technologies: Buy| Target: Rs 63| Stop Loss: Rs 51| Upside 14%
From the two years, the stock has been consolidating in a broader range of Rs 40-55 levels along with consistent buying on every dip.
This week as well we have observed a fresh consolidation breakout above the multi-week resistance level along with hefty volumes which suggests that bulls are actively taking control over the scrip.
Additionally, the stock has managed to close above its long term moving average on a weekly interval which is again a positive signal.
Traders can accumulate the stock on dips in the range of Rs 55-56 for the upside target of Rs 63 levels, and a stop loss below Rs 51.
(The author is a Senior Research Analyst, SMC Global Securities Ltd.)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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