Aditya Agarwal
The much-awaited breakdown took place during the Wednesday’s trading session. The Nifty decisively broke and closed below 10,700 levels. It closed below 10,600 on Thursday.
In line with our expectation, indices saw follow-up selling on expiry day. The Nifty precisely corrected towards its previous daily swing low of 10,550.
In Thursday’s trade, the index penetrated its lower Bollinger band, which got squeezed due to its previous consolidation. After struggling near 60 levels, the weekly relative strength index (14) signalled a negative crossover.
The technical set up is bearish and indicates high possibility of a further correction in the near term.
Going forward, we continue to maintain our cautious/negative stance on the Nifty and expect it to correct towards 10,400 levels. Any decisive closing below the said level will be a bearish indication for the medium term.
10,700, which was earlier acting as a strong support, is likely to act as a strong hurdle above which the next resistance is seen around 10,785.
Rollover and future and options data indicates bearish sentiment in the early part of the July series. Rollovers in the Nifty and Bank Nifty futures were on the short side and both indices closed at a discount as compared to spot, indicating bearish mood among traders.
The July series has started with maximum call writing at 10,700 strike. That level will continue to act as a stiff resistance zone. At the lower end, put writing was seen at 10,500 strike, which will remain the immediate support.
However, the overall outlook remains weak and a sharp sell-off is expected below 10,500, which can drag the Nifty towards 10,400 levels and lower.
Here is a list of top 3 stocks that could return 5-8 percent in the next 15-20 trading sessions:
Dr Reddy’s Laboratories Ltd: Buy around Rs 2,300 – 2,280| Target: Rs 2,450| Stop Loss: Rs 2,175| Return 7.7%
The stock has seen a mammoth buying interest during the beginning of the month and rallied sharply towards Rs 2,430. Subsequently, it saw mild profit booking and descended lower towards Rs 2,270.
The said level coincided with the 200-SMA which acted as a sheet anchor. The daily RSI (14) took support near 60 levels and started rallying higher.
Hence, we advocate traders to buy this stock at the current level of Rs 2,300 – 2,280 with a price target of Rs 2,450 and stop loss placed at Rs 2,175.
NIIT Technologies Ltd: Sell at Rs 1,070 – 1,080| Target: Rs 970| Stop loss: Rs 1,125| Return 8.4%
NIIT Technologies has seen a spectacular run-up in the past one year and in that optimism, stock registered an all-time high of Rs 1,192.
Subsequently, it saw bouts of profit booking in the past few weeks and corrected till Rs 1,050 levels. At this juncture, it seems that the bullish momentum has exhausted as the stock is constantly resisting near Rs 1,150.
The daily RSI (14) is struggling to cross above 60 levels which is a probable sign of reversal. Hence, we recommend traders to sell this stock in a range of Rs 1,070 – 1,080 with a price target of Rs 970. A stop loss should be placed at Rs 1,125.
Indiabulls Housing Finance: Sell around Rs 1,155 – 1,165| Target: Rs 1,080| Stop loss: Rs 1,197| Time frame 15 to 21 trading session| Return 5%
Looking at the weekly chart, the stock broke the upward sloping trend line during mid May 2018 and saw sharp correction towards Rs 1,080.
Subsequently, the stock saw decent recovery and retested its trend line which we termed as a pullback. In line with the technical, stock precisely resists near the upward sloping trend line and turned sharply lower.
During Thursday’s session, stock confirmed its breakdown post-consolidation. The daily Bollinger band has started expanding, indicating a period of high volatility is on the card.
Hence, traders can build a short position in the range of Rs 1,155 to Rs 1,165 with a price target of Rs 1,080. A stop loss should be placed at Rs 1,197.
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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
