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Last Updated : Dec 07, 2018 08:14 AM IST | Source: Moneycontrol.com

Podcast | Stock picks of the day: Use pullback towards 10,700-10,750 to initiate shorts

Going forward, any decisive move below the 10,525–10,440 zone will open the door to a retest of 10,000 – 9,950

Aditya Agarwal
 
 
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Aditya Agarwal

The recent sell-off in the US equity market weighed on emerging markets (EMs), including the Indian market, which corrected sharply over the past few trading sessions.

On Thursday, selling pressure accelerated as Nifty opened lower with a gap and tumbled sharply below the 10,600 in intraday trade. However, it managed to hold end the session above 10,600.

The sell-off was so sharp that Nifty failed to find any support around 10,710-10,775 and eventually ended near its lowest point of the day.

At this juncture, we are meticulously watching the 10,525–10,440 zone as this level coincided with previous swing lows. Going forward, any decisive move below this zone will open the door to a retest of 10,000 – 9,950.

On the other side, 10,670 will act as an immediate hurdle above which Thursday’s gap area of 10,722.65 – 10,747.95 will act as a strong resistance.

F&O data also indicates a continuation of the corrective move in the coming sessions. In the last two trading sessions, heavy call writing was seen for the 10,700 option. At the same time, unwinding was seen at the 10,500 strike put option.

This clearly indicates that traders are initiating short positions and are reducing their long bets on the market. On the lower side, 10,500 will prove to be an immediate and strong support for the Nifty and a break below that can drag the index further down.

Here are 3 stocks that could return 6-14% in the next 1 month:

PVR: Buy above 1,531| LTP: Rs 1,489| Target 1,700| Stop Loss: Rs 1,428| Return 14%

Looking at the weekly chart, the stock has been correcting in a ‘Downward Sloping Channel’ pattern since the beginning of May 2017. Subsequently, the stock formed strong base near 1100 – 1060 zone and rebound sharply.

As a result, PVR broke the upper band of the channel pattern which led to a breakout. The weekly RSI (14) entered above the 60 level which supports our hypothesis.

Hence, we advocate traders to buy this stock above 1531 with a price target of 1700 and a stop loss placed below 1428.

RIL: Sell at Rs 1,130-1,140| LTP: Rs 1,123| Target: Rs 1,050-1,016| Stop Loss: Rs 1,187| Return 6%

After forming a ‘Bullish Divergence’ in the month of October; 2017, stock saw decent run up and tested 1180 – 1190 zone.

Looking at the daily chart, the said zone coincided with the 50% retracement of its entire fall from the top of 1329 to the bottom of 1016.40.

During Thursday’s trade, Reliance broke the upward sloping trend line drawn from the swing low of 1016.40 which indicate that the stock is likely to resume its downtrend.

Hence, we recommend traders to go short in this counter in a range of 1130 – 1140 with a downside target of 1050 first and in case of further pessimism stock can retest its bottom of 1016. A stop loss for short positions should be placed above 1187.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

Voltas: Sell at 537| LTP: Rs 538| Target 480| Stop Loss: Rs 570| Return 11%

Looking at the daily chart, the stock reversed after testing its 200-DMA during November 20, 2018. Subsequently, stock descended and broke the upward sloping trend line join from the bottom of its swing low of 472.25.

The daily RSI (14) reversed after testing the 60 levels. Also, the weekly Lower Top Lower Bottom formation is intact.

Hence, we recommend traders to go short in this counter at the current level of 537 with a downside price target of 480. A stop loss should be placed above 570 on a closing basis.

Disclaimer: The author Head of Technical Research, Way2Wealth Brokers Pvt. Ltd. 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 Dec 7, 2018 08:14 am
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