In the truncated Diwali week, markets remained in a 300- point range, where both the support and resistance range played out accurately.
Historically, the market does not correct during Diwali week and this is what we saw in the last three sessions but it was a bit tentative.
We continue to remain cautious because of a few technical developments. The ‘Lower Top Lower Bottom’ on the daily chart got confirmed on October 29 after it broke below 18,000. This coincided with the violation of the key short-term moving average of 20-day exponential moving average (EMA), which is now acting as a sturdy wall.
More importantly, if we take a glance at the monthly chart, we can see a ‘Shooting Star’ pattern, which certainly does not bode well for the bulls.
Traders are advised not to carry aggressive bets on the long side as long as the Nifty remains below 18,000–18,100 on a closing basis.
We may see this corrective move extend to 17,450 first and if things worsen, then 17,200–17,000 cannot be ruled out. The coming week would be quite crucial for the market as it may dictate the near-term direction.
Here is one buy call and one sell call for next week:
Garden Reach Shipbuilders: Buy | LTP: Rs 262.50 | Stop Loss: Rs 225 | Target: Rs 278 | Return: 6 percent
This stock was unmoved from August 2020 to August 2021. Now, it has finally started to cut loose, as we have witnessed a series of volume-based buying since early October. Recently, it had a brief pause after witnessing a good rally.
On November 3, the stock gave a solid bump up to resume its recent uptrend. If we look at it from a broader perspective, we can see prices breaking out from two years of consolidation range, which resembles a 'Triangle' Pattern.
This is probably just the beginning, we expect many such upward legs to unfold. We recommend buying on a small decline for a short-term target of Rs 278. The stop loss can be placed at Rs 225.
Bajaj Finance: Sell | LTP: Rs 7,525.10 | Stop Loss: Rs 7,620 | Target: Rs 7,240 | Return: (-3.8) percent
Bajaj Fin-Twins have been among the rank outperformers over the past decade or so. Undoubtedly, their higher degree trend remains strongly bullish but with a near-term view, there are some signs of fatigue.
Bajaj Finance has seen some profit-booking in the last couple of weeks and though, in the truncated week gone by, it did not do much, the weekly chart looks a bit weak.
In addition, the ‘RSI-Smoothened’ oscillator has confirmed a negative crossover, indicating some corrective moves in the coming days. One can look to sell with a strict stop loss of Rs 7,620. The immediate target can be seen in the range of Rs 7,280 –7,240.
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