Our advice to traders and short-term traders is to stay away in taking bullish call for the next few weeks on HDFC
In the truncated week, the market managed well to sustain above its crucial support placed at 11,000 amid uncertain global cues and disappointments from domestic developments.
Bulls helped the Nifty to pull out from the lows of 10,900-10,940 to close the week at 11,048, which is positive for the market. However, on a weekly basis, the index closed in the red.
A couple of weeks prior, Nifty closed 1.97 percent higher than was the first positive close, and after that, we saw four consecutive weeks of fall that resulted in a damage of nearly 900 points.
In the previous week, even though, the flows were not satisfactory, Nifty managed to sustain above 10,785, which was the lowest of the current sell-off.
If the index has to surpass 11,181 which is the recent swing high, it requires some more fuel. In the previous week, the Nifty neither broke the lows of prior week nor highs, however, it managed to close near the highest point of the overall range of last week.
Such patterns are bullish in nature especially when they appear at the bottom of the sell-off on a weekly basis. However, for bullish validation, the Nifty requires to surpass 11,181, which is the highest level seen in the last two weeks.
We can expect specific strength in the market if the Nifty closes above 11,181, and above that, it could move towards 11,350 or 11,450.
In case, Nifty fails to surpass 11,181, and on the contrary, breaks below 10,780, then it would be grossly negative for the market.
Sector and stock-specific
Finance and metal companies should be on our watch list this week. If we go through stocks individually, the index heavyweight such as Reliance Industries has reversed the bearishness sharply on the weekly as well as on a monthly basis, which is bullish for the stock.
Nifty IT index closed lower, which is bearish but this would help other heavyweights of Nifty components. Bank Nifty will move higher as they are inversely correlated at the initial stage.
On the other side, HDFC has formed bearish consolidation on a weekly basis. It has formed Head and Shoulders pattern on a weekly basis and closed below the level of neckline support, which is negative for the market.
We had spotted very early the head and shoulder pattern of RIL, which has completed almost its targets and now it is the turn of HDFC, which is also an early spotting.
Our advice to traders and short-term traders is to stay away in taking bullish call for the next few weeks on HDFC.
The author is a senior VP (Technical Research), Kotak Securities.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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.