Vinay Rajani
Nifty started on a weak note and extended the fall by more than 90 points. Nifty has now reached near to its 200 DMA, currently placed at 11,140.
Nifty Smallcap and Midcap Indices are down 42 percent and 27 percent, respectively from their all-time highs, registered in January 2018. Interestingly, Nifty and Sensex are less than 8 percent down from their all-time highs, registered on June 3, 2019. Performance spread between Sensex and BSE Smallcap index is at the highest level after normalization since 2005.
More than 80 percent of all BSE stocks are trading below their 200 DMA. This Indicates that the breadth of the market has been very negative in the recent past.
Since the Union Budget on July 5, Nifty has been forming lower tops and lower bottoms. Nifty violated the support of 50 and 100 DMA. Immediate support for Nifty now comes at 11,108, which happens to be the previous bottom on the daily charts. Upward sloping trendline on the above chart indicates that Nifty has entered into a medium-term downtrend.
Elliot Wave analysis indicates that Nifty has completed 5-Wave cycle, which started in October 2018 from the level of 10,004 and now placed in corrective waves. Nifty is currently in continuation of 'C' corrective wave, which indicates the downtrend.
Fibonacci retracement of the wave cycle indicates the strong support around 10,806, which happens to be 61.8 percent retracement of the entire swing seen from 10,004 to 12,103.
Technical setup of Nifty Private sector Bank Index looks bullish on the charts. Largecap Private banks can outperform in the current scenario.
We believe that Nifty is in continuation of a downtrend. Oversold RSI could lead to pullback but resistance levels should be utilized to sell. Resistance is seen at 11,400 while supports are seen at 11,108 and 10,806.
Here are the top stock trading ideas which can give good returns:
ICICI Bank: Buy | Target: Rs 462 | Stop loss: Rs 402 | Return: 8
Nifty private sector index formed Bullish Hammer candlestick pattern on the weekly charts. Last week, the index took support on its 200 DMA and reversed north. The index also took support on the long term upward sloping trendline, adjoining the weekly lows of December 30, 2016, October 5, 2018, and October 26, 2018.
ICICI Bank is the major constituent of the Private Bank Index which has been resilient in the current down move.
Considering the technical evidence, we recommend buying the stock at CMP, for the target of Rs 462, keeping a stop loss at Rs 402 on closing basis.
Engineers India: Sell | Target: Rs 90 | Stop loss: Rs 108 | Return: 12%
The stock price has broken down below the consolidation which started in October 2018. The range of Rs 102-130 is violated on closing basis. Multiple bottom support of Rs 102 is violated on closing basis. Moving average, Indicators and Oscillator setup is bearish on daily and weekly charts.
Considering the technical evidence, we recommend selling the stock at CMP, for the target of Rs 90, keeping a stop loss at Rs 108 on closing basis.
NBCC: Sell | Target: Rs 41 | Stop loss: Rs 51 | Return: 13%
The stock has broken down below the consolidation which started in December 2018. The range of Rs 68-48 is violated on closing basis. Double bottom support of Rs 48 on weekly chart is violated on closing basis. Moving average, Indicators and Oscillator setup is bearish on daily and weekly charts.
Considering the technical evidences, we recommend selling the stock at CMP for the target of Rs 41 keeping stop loss at Rs 51 on closing basis.
The author is a Technical and Derivative Analyst at HDFC securities
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