Manali Bhatia Rudra Shares
Bulls and bears continued fighting for their dominance in the week gone by as the benchmark indices remained subdued in a tight range.
Nifty also failed to show any directional move and closed with the weekly gain of 0.6 percent at 10,794.95. The market is contracting even further within its own wide range and this kind of pattern suggests that traders should be cautious and ready for a big move coming their way.
As per the retracement theory if we consider the average true range, the average weekly range of Nifty is 355 points, which has contracted to 137 points in the previous week and such scenario indicates the probable big move is on the card and traders should be ready for a breakout on either side.
In coming days, 100-DMA (10,856) will act as a major resistance as bulls have failed to surpass it thrice. Decisive breakout of the level could result in fresh move till 10,980. Weekly support, on the other hand, exists at 10,700-10,680 range that if breaks on lower side could further decline till 10,550.
However, for a fresh directional move, the 10,980-11,000 range needs to trade on higher side decisively.
For Nifty options, 10,500 put option and 11,000 call option holds the highest open interest and the overall setup is suggesting that big move is not ruled out once 11,000 trades on a higher side. Until then, countertrend trades will be the flavour of the week.
The market seems to be rangebound and we expect it to continue to trade the same. However, this movement is to remain sector specific. As Q3 results have started coming out, IT sector have shown subdued performance. Hence, we suggest staying away. Even the metal sector is already under pressure due to a global slowdown and we expect the pressure to continue in the coming weeks.
Apart from this, the banking sector delivered results above expectations and are available at good retracement. Therefore, we see potential upside from here. In addition, agrochemical and FMCG may be a good bet under Indian consumption theory in coming weeks.
ICICI Bank | Rating: Buy | CMP: Rs 378.55 | Target: Rs 409 | Stop loss: Rs 361 | Return: 8 percent
The stock has outperformed the Nifty and is trading at an all-time high. Bank Nifty is clearly stronger than Nifty on the charts and trading above all major moving averages. We believe that private banks could perform in the coming days. The stock has formed a bullish Head & Shoulder formation on daily chart and trading above neckline.
On the weekly chart, RSI has reversed from important support level and is suggesting that the upside momentum will continue further. Prices are trading with higher top and higher bottom formation and can be bought for short-term gain.
ITC | Rating: Buy | CMP: Rs 295.35 | Target: Rs 325 | Stop loss: Rs 280 | Return: 10 percent
The stock has been in consolidation phase for the last three months and has now broken out of a triangle formation on the daily chart.
Crossover of major short-term exponential moving averages above long term averages is indicating a trend reversal in the counter. Prices are tagging above the upper Bollinger Band and indicating the fresh up move is likely in the near term.
Daily RSI which has been trading in rangebound trajectory for the last few weeks, has now moved to a bullish zone. Also, on the weekly chart, it is trading above important moving averages and the overall setup making it a prudent buy for short term.
Escorts | Rating: Buy | CMP: Rs 753.55 | Target: Rs 814 | Stop loss: Rs 710 | Return: 8 percent
This stock has been on a continuous uptrend for the last few weeks and recent fall was arrested at 61.8 percent retracement level of the previous swing move and formed bullish candlestick pattern. Weekly RSI has also shifted to positive zone after a recent correction.
On the daily chart, there is a crossover of important exponential moving averages that suggests the stock is heading towards a fresh directional move.
Power Grid | Rating: Sell | CMP: Rs 194 | Target: Rs 185 | Stop loss: Rs 199 | Return: 5 percent
The stock has been trading in a range for the last few weeks and recently formed a bearish candlestick pattern at higher band of the range. It is showing a reversal pattern after testing resistance of 100-DMA.
On the daily chart, the stock has started trading below 20-DMA and RSI is suggesting that momentum is likely on the downside and short-term trade-able correction is expected in the counter.
The author is Senior Research Analyst at Rudra Shares & Stock Brokers Ltd.
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