Aditya Agarwala, Senior Technical Analyst, Yes Securities, says investors should closely track the spread of coronavirus infections in India and the US bond yields, which cooled off the previous week but a spike can lead to volatility in the market once again.
The analyst thinks that the recent correction in the auto index should be considered healthy, as it will make room for the next leg of the upmove. In an interview to Moneycontrol’s Kshitij Anand, Agarwal says 14,230-14,260 will act as key support for Nifty in the April series, below which correction of 14,000-13,930 can be triggered. Edited excerpts:The Sensex and the Nifty50 fell by over 1 percent each in the week gone by. What led to the price action?
The weakness in the benchmark indices could be attributed to the fast-rising COVID-19 cases in India and fears of strict measures by the government to curb their spread, which could also include partial lockdowns.
Uncertainly on the magnitude of the spread of COVID-19 in its second wave kept traders jittery, forcing them to book profits.
What does the March expiry data tell about market behaviour in the April series? What is the range you have for the Nifty and the Nifty Bank?
The Nifty50 posted its worst expiry performance after September 2020, shedding a mammoth 5.12 percent in the March 2021 series.
Further, the Nifty has now formed two consecutive lower highs and lower lows, moving in a downward sloping channel, indicating that a corrective wave is going on at the moment.
However, the bulls did manage to protect the lower end of the channel, which also happened to be the 127 percent Fibonacci extension level placed between 14,260 and 14,230.
Therefore, this zone of 14,230-14,260 will act as key support areas and the pivot point, below which acute corrections to 14,000-13,930 could be triggered.
On the upside, 14,570-14,650 are stiff resistance zones being 50 percent and 61.8 percent Fibonacci retracement levels, respectively, of the previous fall. A sustained trade beyond 14,650 will open gates for an extended up move to levels of 14,850-14,870.
Q) Any factors that investors should watch out for in the April series?
Investors should closely watch out for the spread of COVID-19 back home in India and also the US bond yields, which has cooled off in the past week; however, a spike again can lead to choppiness in the market.
Earnings season will also kick off with IT giants reporting their Q4 results, therefore investors need to keep a tab on that as well.
Small & midcaps underperformed. Are investors booking profit in the broader market space after the recent rally?
Small and midcap indices were sitting at extreme overbought levels after the recent run-up in prices along with that RSI had started forming negative divergences, which indicated that the uptrend is losing steam and a corrective phase could follow.
With the weakness in benchmark indices, investors used it as an opportunity to book profits in the broader markets as well leading to the underperformance in the week gone by.
In the coming trading sessions, 50-DMA would act as a crucial support area for both smallcap and midcap indices.
A breakdown from this moving average support, which has been acting as a stop loss line could extend the corrections to levels of 7,500 on the smallcap100 Index and 21,500 on the midcap100 Index.BSE auto and telecom sectors cracked by over 4 percent each. What led to the price action?
The auto index had run up quite significantly and was sitting at overbought territory and a correction in the sector should be considered healthy, which will make room for the next leg of the upmove.
The Nifty auto index tested crucial trendline support after the recent correction and a sustained trade 9,600-9,650 will resume the uptrend in the coming sessions.
Following the recent correction, risk-to-reward is in favour of going long in the select auto stocks. Along with auto stocks, telecom stocks also corrected as they grappled to keep their subscriber base intact and bid for the 4G spectrum.
Any three-five trading ideas for the April series?
Here is a list of top trading ideas for the April series:
Shree Cement: Buy| LTP: Rs 28090| Target: Rs 30000| Stop Loss: Rs 27200| Upside 7%
The stock has turned upwards from the 50 percent Fibonacci retracement level and is on the verge of a breakout from trendline resistance at 28700, a successful breakout on healthy volumes will resume the uptrend.
The RSI has also turned up after forming a positive reversal confirming the bullishness.
SAIL: Buy| LTP: Rs 76.70| Target: Rs 87| Stop Loss: Rs 71| Upside 13%
The stock has broken out from a bullish Flag pattern on very good volumes, triggering the resumption of the uptrend.
Further, it is trading well above all its major moving averages confirming the bullishness. RSI is also favouring an up move.
Titan Company: Buy| LTP: Rs 1506| Target: Rs 1610| Stop Loss: Rs 1450| Upside 7%
The stock is on the verge of a breakout from a Triangle pattern resistance line placed at 1,515, a successful breakout on higher volumes will resume the uptrend.
Further, 20-DMA is also about to make a bullish crossover with the 50-DMA, suggesting a bullish buildup in the stock.
RSI has turned upwards after forming a positive reversal and positive DI and crossed over negative DI confirming strength.Disclaimer
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