For the rest of the week the range looks shifted towards 11,700-11,350 as of now.
After a prolonged gradual up move from its recent base around 11,111, Nifty shaved off its 6-day gain in a single day decline as it formed a 'Long Bearish Bar' on its first day of the week near the anticipated level around 11,800 which proved as a firm resistance area. On its way down, it has also breached below the crucial support zone near 11,450 & revisited its 20-Day EMA which is placed around 11,340.
But Tuesday's action remained sublime as compared to its prior days' trading range as the index formed a small Doji formation to end the day close to 11,500 level. Options data indicates huge strong cluster resistances around 11,800, 11,700 and 11,600 as depicted by its CE open interest built-up in its weekly expiry data.
While PE open interest clusters at 11,000-11,100 indicate supports to remain firm around the same. Open interest Put Call Ratio (PCR) slipped from 1.64 to 1.27 since last Friday standing close to its oversold zone along with its 60 min RSI around 33 with multiple spikes rebounding from 11,325.
For the next few days it's ideal to remain vigilant & trade cautiously until the magnitude of unwinding cools off completely & signs of stability are exhibited by the indices. For the rest of the week the range looks shifted towards 11,700-11,350 as of now.
Here is a list of three recommendations:
Dr Lal PathLabs: Buy
On its weekly scale Dr Lal PathLabs had witnessed a breakout from a 'Cup & Handle' formation in the month of July around the level of Rs 1,700. The recent pullback towards this pattern resistance line provides yet another opportunity to add longs. The pullback has been gradual in nature & seems to be arresting around its 20-Week EMA.
Even on the price front the pullback displays classic characteristics of a zig zag corrective wave terminating around Rs 1,740-1,720 zone. As the corrective wave provides yet another opportunity to participate in its existing secular upmove towards Rs 2,250, even trading longs could be deployed with a stop below Rs 1,670.
Positive sector outlook & breakout from its 'Falling Wedge' formation on its daily scale indicates momentum to continue further. The convergence of its 5 & 20 weeks EMA is also a good sign of incremental strength, alongwith its daily RSI level jumping above 55. As the setup looks healthy & deploying longs upto Rs 395 could make the risk reward more favourable for aggressive longs which could be deployed with a stop below Rs 385 for an initial upmove towards Rs 440.
Occurrence of a 'Tweezer Top' candlestick formation around its trendline resistance zone near Rs 770 was an early sign of weakness. Even on its daily scale the stock recently witnessed a breakdown below its ongoing channel pattern around Rs 735-740 zone. Pullback towards the breakdown zone around Rs 735-740 should be used to add fresh shorts for a pattern target upto Rs 670 with a stoploss around Rs 748.
The author is DVP – Technical (Equity) at Tradebulls 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.