The first half of the April series can see a pullback short covering rally, therefore strategy should be to buy the dip for a pullback rally in the first half of the April series, Aditya Agarwala, the Technical Analyst at YES Securities (I) Ltd, said in an interview to Moneycontrol's Kshitij Anand.
Q) The Nifty50 flirted with its 200-DEMA and 200-DMA for the week ended March 28. Although, the index managed to gain for the week ended March 28. It slipped nearly 3% or above 250 points in the month of March. How is the Nifty looking on technical charts?
A) The Nifty50 Index is trading below its 200-DEMA and 200-DMA for the first time from January 2017 onwards as it lost 3.61 percent in the month of March following a cut of 5 percent in the month of January.
Moreover, whenever the index breaks its 200-DEMA and 200-DMA following a prolonged trade above the averages, it tends to flirt around these averages before witnessing the next leg of correction.
Currently, the index has pulled back marginally after taking support at the 38.2 percent Fibonacci retracement level placed at 9920 and RSI has also formed a positive divergence on the chart, suggesting further scope for short covering rallies to levels of 10278-10478 being 61.8 percent Fibonacci retracement level and recent peak respectively.
However, failure to make a higher high (i.e. above 10478) can lead to fresh selling which may take it below the recent low of 9950.
Q) What is your outlook for Nifty in April series? Do you see the index consolidating in a narrow range?
A) The Nifty has bounced back after taking support at the 38.2 percent Fibonacci retracement level placed at 9930 and RSI has formed a positive divergence which suggests more short covering rallies in the first half of the April series following which Index can enter into a narrow consolidation range or resume corrections.
Q) What is your call on smallcap and midcap stocks which underperformed in the month of March? Should investors stay away or just book profits on rallies?
A) Midcap and smallcap indices have formed positive divergences on multiple time frame charts suggesting a pullback rally in the offing.
Further, RSI has formed a positive reversal on the weekly chart indicating that the downtrend is losing steam, which can lead to short covering. Therefore, investors should look to book profit on rallies and not at current levels as both the Indices are bouncing back from the oversold zone.
Q) What should be the ideal strategy of investors in April series – buy on dips or sell on rallies? Any F&O strategy which can be deployed for April series?
A) The first half of the April series can see a pullback short covering rally, therefore strategy should be to buy the dip for a pullback rally in the first half of the April series.
However, a correction cannot be ruled out at a later stage as the overall trend remains weak at the moment.
Q) Top 3-5 positional call which could give handsome returns to investors in April series?
Castrol India Ltd: BUY | CMP: Rs 205 | Target: Rs 220| Stop loss: Rs 195 | Return: 7.3%
RBL Bank Ltd: BUY | CMP: Rs 480 | Target: Rs 530 | Stop loss: Rs 450 | Return: 10.4%
UPL LTD: BUY | CMP: Rs 730| Target: Rs 790| Stop loss: Rs 694 | Return: 8.2%
Bosch Ltd: BUY | CMP: Rs 18018 | Target: Rs 21300 | Stop loss: Rs 16400 | Return: 18%
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