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Last Updated : Nov 05, 2018 12:49 PM IST | Source: Moneycontrol.com

Short covering likely to drive Nifty towards 10,550-10,600

Aditya Agarwal of Way2Wealth Brokers said if Nifty breaches 10,200 than bullish view will be negated and, in that scenario, indices can test their previous lows of 10,000

Moneycontrol Contributor @moneycontrolcom
 
 
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Aditya Agarwal

Way2Wealth Brokers

The November series started on a weak note with Nifty correcting by more than 100 points on October 26. However, the index managed to sustain above 10,000 and from those levels short covering helped the index to test 10,400 and 10500.

In the short-term, the gap area formed in Nifty on October 19 (10440) will act as a stiff resistance zone. If Nifty manages to sustain above 10,400 then we can see some more short covering move that can drive the index towards 10,540-10,600.

Close

For the current series, we expect the index to trade in the broad range of 10,000-10,600. But within this range also the index will be quite choppy and big intraday swing are expected on both sides.

On the lower side, Put writing at 10,200 will act as a support zone for the index and any intraday dip can be used to initiate long positions targeting 10,550-10,600.

If Nifty breaches 10,200 then bullish view will be negated and, in that scenario, the index can test its previous low of 10,000.

Like Nifty, Bank Nifty is also stuck in a broad range of 24,400-25,600 and current levels do not provide any clear trading opportunity.

Buying on dip strategy can be implemented in bank nifty and correction towards 25,000-24,800 can be used to initiate longs with targets of 25,600-25,900.

Here are top three stocks which could give 9-14 percent return:

Ceat: Buy around Rs 1,170-1,160 | LTP: Rs 1,181.75 | Target: Rs 1,260-1,290 | Stop loss: Rs 1,110 | Return: 9.2 percent

After a sharp correction from Rs 1,450 to Rs 1,000, Ceat has seen a good consolidation at lower levels. Last week, the stock saw a sharp short covering move followed by fresh long accumulation in the last two trading sessions.

In Friday’s trade, the stock has given a breakout above its resistance zone of Rs 1,160 and has managed to close above that. Hence, we recommend traders to initiate fresh long positions with targets of Rs 1,260-1,290.

Vedanta: Buy around Rs 210-213 | LTP: Rs 225 | Target: Rs 235/248 | Stop Loss: Rs 194 | Return: 10 percent

The stock has been consolidating in a narrow band of Rs 195-220 for the last few weeks. In Friday’s session, aggressive long positions were added in the counter from the lower levels.

It has a strong support around Rs 195 levels which also coincides with its 200-week moving average. From the current levels, the risk to reward ratio is in favour of buyers and fresh long positions can be initiated with targets of Rs 235-248 and a stop loss placed below Rs 194.

Marico: Sell around Rs 315-320 | LTP: Rs 337.85 | Target: Rs 300-290 | Stop loss: Rs 332 | Return: 14 percent

On a larger degree chart, Marico gave a breakout below Rs 330 and saw a sharp correction that dragged it below Rs 300 last week.

However, short covering helped the stock to recover some of the early losses but on a higher side, it is still facing stiff resistance around its 200-DMA which comes around Rs 330.

In Friday’s trade, fresh short accumulation was seen in Marico which indicates fresh correction in the counter. The overall outlook in Marico remains bearish and any pullback towards Rs 320 can be utilised to initiate fresh shorts with targets Rs 300-290 and stop loss placed above Rs 332.

The author Head of Technical Research, Way2Wealth Brokers Pvt. 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.

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First Published on Nov 5, 2018 12:49 pm
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