Going ahead, we expect Nifty to hold the 10,600-mark as it is 61.8% retracement of last up move (10,334–10,985)
Nifty witnessed a sharp rebound of more than 200 points on Wednesday from the day’s low of 10,535, thus forming a bullish Piercing Line candle in the daily chart. A follow through move above Wednesday’s high (10,747) will signal extension of the up move towards the upper band of the recent consolidation placed around 11,000 levels. For the coming sessions, Wednesday’s panic low of 10,535 is likely to act as crucial support.
Structurally, despite a host of negative events during December, Nifty has managed to form a higher bottom, indicating inherent strength of the market. The weekly stochastic remain near the overbought territory so we believe the index is likely to enter into a broader range of consolidation (11,000–10,600) and form a higher base.
Going ahead, we expect Nifty to hold the 10,600-mark as it is 61.8% retracement of last up move (10,334–10,985). Post state election results in early December 2018, index formed higher bottom at 10,335, while retracing its preceding up move by 61.8%. As we expect the Nifty to follow same rhythm in current decline, we expect index to form a higher base around 10,600-10,550 levels as it is the confluence of the following technical observation:
- 61.8% retracement of the previous up move (10,334–10,985) placed at 10,580 levels
- The 50-days SMA placed around 10,580 levels
The Nifty midcap and smallcap indices took a breather to cool off the overbought situation on prices formed due to last two week’s sharp up move (over 10%). We believe the index is likely to enter a consolidation phase that would assist both indices to form a higher base amid stock specific action.
Hence, one should focus on accumulating quality stocks with improved earnings in the ongoing corrective phase
We spoke to ICICI Securities and here’s what they have to recommend:
Bank of Baroda | Rating: Buy | Target – Rs 132 | Stop Loss: Rs 109 | Upside: 12% | Time frame: 1 month
The share price of Bank of Baroda has bounced back after finding support from 61.8% retracement of recent up move seen from October low to November highs (|91 - |118) indicating resumption of uptrend, thereby offering a fresh entry opportunity, with a favourable risk-reward set up
Past two months price action has been enclosed inside the upward sloping channel formed adjoining subsequent lows of October and December of |91 – |102 and projected from |115, suggesting positive bias. Meanwhile, the immediate support is placed around |109 as it is 50% retracement of current up move (|102 – |117), placed at |109 levels
Among oscillators, the weekly MACD indicator logged a bullish crossover and now inching upward, thus supporting the positive bias
We expect stock to resolve higher and head towards our earmarked target of | 132 levels in the coming month as it is confluence of:
- 61.8% retracement of the last major decline |156 – |91, placed at |131
- 200 days SMA is placed around |128
- Bearish gap (|135 – |126) recorded on 18th September
Abbott India | Rating: Buy | Target Rs 8,450 | Stop Loss: Rs 7,070 | Upside: 13% | Time frame: 6 months
The stock is in secular uptrend as it continues to form higher peak and higher trough in the monthly chart and is seen trading in a rising channel highlighting sustained buying demand at elevated levels. The last three month corrections has seen the stock testing the lower band of the channel thus providing fresh entry opportunity to ride the next up move in the stock.
The share price of Abbott India has registered a breakout above multiyear highs around | 6170 levels during middle of previous year. The stock post the breakout has rallied and hit an all time high of | 8820 during September 2018. The last three months sideways corrective consolidation has helped the stock work off the overbought condition developed after the previous sharp rally. The stock is currently placed at the major support area of | 6900-7100 being the confluence of:
- The lower band of the rising channel placed since C.Y’17
- 50% retracement of the previous up move | 5430-| 8820 placed at | 7130 levels
The stock has already taken four months to retraced just 50% of the previous five months up move (| 5430 to 8820). A slower retracement suggests corrective nature of current decline and positive price structure
We expect the stock to resume fresh up move and test levels of | 8450 levels in the medium term as it is the 80% retracement of the entire previous decline (| 8820-6900) placed around | 8450 levels
The author is Head Technical at ICICI Securities.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.