In case the Nifty breaks below 10,800 and sustains there a couple of times on a closing basis then selling pressure could take the index towards 10,640-10,500 levels
The Nifty witnessed a relief rally on September 4 after the sell-off seen in the previous session. The index reclaimed 10,800 on a closing basis on September 4.
Of the Nifty constituents, around 13 stocks are trading above their 50-DMA and 15 stock are sustaining above their 200-DMA. This indicates that the market is in a bear grip as majority of the stocks are trading below the short and long term moving averages.
On the higher side, 11,150 Nifty is seen as a supply zone. Currently, the Nifty pack is trading between its 50-EMA and 100-EMA, which is placed at 11,200 and 10,800, respectively, on the weekly timeline.
The Nifty is largely trading in a tight 400 points range (10,800-11,200), with RSI moving around 38, projecting a downward picture.
History suggests that from November 2018 to March, the Nifty largely traded between 10,550 and 11,000. In the coming week, one may see the same range work as a support zone for the index.
On the options front, maximum Put open interest for September expiry was placed at 10,800 strike. On the call side, 11,200 strike, which has the highest open interest, is likely to act as stiff resistance.
The broader range for the September series is 10,800-11,200. In case the Nifty breaks below 10,800 and sustains there a couple of times on a closing basis then selling pressure could take the index towards 10,640-10,500 levels.
Any big upside move should be expected only above 11,150 levels.
Here is a list of top three stocks that could return 7-10 percent in the next 3-4 weeks:
Asian Paints: Buy| LTP: Rs 1,535.15 | Target: Rs 1,654 |Stop Loss: Rs.1,485| Upside 7.75%
After a prolong consolidation Asian Paints managed to break out from the level of Rs 1,522 in the month of August. Asian Paints is consistently outperforming the Nifty on monthly as well as weekly price scale.
The upper side of the said Triangle pattern is placed at Rs 1,520. The support level for the stock is placed at Rs 1,520-1,530. The breakout will fail if the stock closes below Rs 1,480 on the downside.
On the higher side, the stock will resume its upward trend and make new 52-weeks high only a close above Rs 1,622 which could further take the stock towards Rs 1,654 levels.
Traders can accumulate the stock in the range of Rs 1,520 - 1,540 for the target of Rs 1,654, and a stop loss below Rs 1,485.
Kotak Mahindra Bank: Sell| LTP: Rs 1,426.45 | Target: Rs 1,310 |Stop Loss: Rs 1,500|Downside 7.74%
From the last week of May 2019 till the last week of August 2019, Kotak Bank was trading in the range of Rs 1,444-1,544. The stock broke down from the said range last week and continues to trade below the range.
RSI on the weekly basis has already given a bearish indication by reading below 50 this week. The stock is also penetrated 20-EMA on a weekly basis. Triple exponential moving average of 20 periods is supporting the bears, and the upside seems to be capped around Rs 1,500.
In the coming few weeks, lower levels of Rs 1,310 may be checked by Kotak Bank. Traders can sell the stock in the range of Rs 1,420 - 1,425 for the target of Rs 1,310 with a stop loss above Rs 1,510.
Maruti Suzuki India: Sell| LTP: Rs 5,830.75 | Target: Rs 5,250 |Stop Loss: Rs.6,400|Downside 10%
The stock is consistently in a bear grip. The last pullback finished around Rs 6,400 levels where it gave a breakdown post prolonged consolidation.
In the process, it has completed 50 percent retracement of the last fall. Now, the stock is supposed to resume its bear trend and make a new 52-weeks low in the process.
RSI is supporting the bears. It is also trading below 20 & 50-day EMA and Triple exponential moving average of 20.
The stock may be sold in the range of Rs 5,800-6,000 for the target of Rs 5,250, and keep a stop loss above Rs 6,400.
(The author is Technical Research Analyst, Bonanza Portfolio Ltd)
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.