On the downside if Nifty slips below 10,200, only then weakness could emerge to take it towards the 52-week low of 9,952 and next major support will be at 9,800.
Motilal Oswal Financial Services
The Nifty index continued selling pressure in the month of October and drifted towards 10,000 zones. It formed a Bearish candle followed by a Bearish Engulfing in September as follow up selling took it towards its 52-week low of the 9,952 zone.
It was one of the worst months since August 2013 as the index corrected by around 10 percent from its monthly high of 11,035 to its low of 10,004 marks and recorded the biggest fall in terms of total losing points in a month since October 2008.
Nifty index witnessed some relief rally in the latter half of the month, but failed to sustain at higher levels and nosedived below the previous swing low of 10,138-10,000 zones. However, bulls tried hard and the index witnessed a strong pull back in last week's trading session by more than 400 points from lower levels and it ended October with a loss of 5 percent.
Nifty has been moving in a rising channel from the last 2.5 years and recently it broke, but is hovering over the same with multiple hidden divergence on price and mechanical indicators. It has taken support at the psychological 10,000 zone and mechanical indicators are turning from its deep oversold territory.
The index has already formed a short term bottom near the 10,000 mark and a decisive hold above 10,333 zones could start the next up move towards a cluster of hurdles at 10,850 and then at 11,171 levels. However, it has marked multiple supports and resistances, so a consolidative move could continue with every bounce before it touches the potential higher target zone.
On the downside if it slips below 10,200, only the weakness could emerge to take it towards the 52-week low of 9,952 and next major support would be at 9,800 zones. However, short bottom has formed, but higher volatility could continue its rough market ride for next 2-3 months as many domestic and global concerns are weighing higher on domestic indices.
After a sharp fall in September 2018, the stock has taken a support at its previous breakout zones and moving higher while on the hand mechanical indicators are turning from its deep oversold territory which may attract a support based buying.
Mechanical indicator given a positive divergence against the price on weekly & daily scale which suggest further momentum.
It has been making higher highs on daily scale and recent price set up could start a fresh rally.
Thus, recommending to add long position in stock on any dips towards Rs 200 with trading stop loss below Rs 189 for an upside target towards Rs 260 and 285 zones.
After a sharp correction from Rs 1200 to Rs 493 zones, it has taken support at its falling supply trend line on monthly scale.
It has found support at the confluence of 61.8% retracement of last rally and previous congestion zone of Rs 560-600 zones.
It has given a breakout from its falling wedge pattern on monthly scale with a ‘positive RSI crossover’ on monthly chart.
It has given a breakout from its falling supply trend line on weekly scale and it continues to trade above 50 weekly EMA which indicating strength in the stock.
Thus, recommending to Buy the stock in range of Rs 630 – 640 with stop loss below Rs 580 on closing basis for an target towards Rs 750 zones.
Breakout from its downward channel formation and a highest Monthly close since November 2016.
It has also given a breakout from its symmetrical triangle on daily scale and recent price set up could start a fresh breakout rally.
Mechanical indicators are positive in all time frames with positive divergence.Thus, recommending to buy the stock on decline near to Rs 766 to 777 zones with stop loss below Rs 725 on closing basis for an upside target towards Rs 890 levels.