Aditya Agarwal
Rising crude oil prices, fall in the Indian rupee against the US dollar, rising interest rates and macro concerns put tremendous pressure on Indian bourses. The broader indices have corrected by more than 3 percent in the last three sessions.
During the week, Nifty tried to reclaim 11,000 but failed miserably and selling pressure across the board was seen that dragged the index lower.
On October 4, Nifty opened lower with a gap and broke the 200-DMA support and closed with loss of more than 2.5 percent loss. The break of the crucial support with a gap does not augur well in the near term.
At this juncture, momentum indicators are showing an overselling and after such a sharp correction in a short span of time, selling is not advisable at the current level. Hence, we recommend traders to use any meaningful pullback to build short position.
On Nifty, 10,870 will act as a strong hurdle whereas October 4 high of 10,755 will act as an immediate resistance. Until the index is trading below this zone, every pullback should be used to short the index.
On the flip side, 10,500 is likely to act as an immediate support below which the next support is seen near 10,418 which coincides with the daily swing low of May 23, 2018.
Here are the top three stock trading ideas which can give good returns in the near term:
Sun Pharma: Buy around Rs 591 - 585 | Target: Rs 675 | Stop loss: Rs 558 | Return: 15 percent
Looking at the weekly chart, Sun Pharma confirmed its breakout from the double bottom pattern and saw a sharp rally towards Rs 677. Subsequently, the stock saw profit booking in line with the benchmark indices and tested the neckline of the double bottom pattern on October 4.
The daily RSI (14) also came near 40 which supports our hypothesis. Also, the October 4 low coincided with the daily 89-EMA which may act as a near-term support.
Hence, we recommend traders to accumulate this stock in a range of Rs 591 to Rs 585 with a price target of Rs 675. Stop loss should be placed below Rs 558.
Infosys: Sell around Rs 712 - 717 | Target: Rs 660 | Stop loss: Rs 735 | Return: 8 percent
Looking at the daily chart, the stock registered significant outperformance in the recent past and hit a fresh all-time high of around Rs 755. Off late, Infosys saw profit booking from higher levels and descended towards Rs 700.
Looking at the overall set up, we are seeing a formation of a double top pattern and the neckline of said pattern comes near Rs 692. On a monthly chart, the last month candle resembles a formation of spinning top pattern.
The daily RSI (14) is struggling to cross 60 which indicates that the stock might break the neckline.
Hence, we advocate traders to go short in a range of Rs 712 – 717 with a price target of Rs 660. Stop loss should be placed at Rs 735.
Tata Chemicals: Sell around Rs 660 - 666 | Target: Rs 580 | Stop loss: Rs 715 | Time frame: 15 to 21 trading sessions | Return: 15 percent
Looking at the weekly chart, Tata Chemicals formed a triple top pattern and currently it is near the neckline of the said pattern.
On a weekly chart, we are seeing a complex bearish divergence and now the weekly RSI (14) is on the verge of breaking the support level of 40. The daily 9-45 EMA has already signaled the negative crossover.
Considering the above evidences, we recommend traders to short this counter in a range of Rs 660 to Rs 666 with a price target of Rs 580. Stop loss should be placed at Rs 715.
Disclaimer: The author is Head – Technical Research at Way2Wealth Brokers. The views and investment tips expressed by investment experts on moneycontrol.com are their 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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