Nifty again enters overbought state; take long positions in MCX, Amara Raja

The broader market remains strong as the breakout above 10,800 saw a good follow-through close above 10,900 in the week gone by.

Weakness, if any, will only be valid and meaningful in case 10,500 gets breached, until then the journey towards 11,200 will continue. It may get even get extended to 11,377 if the Bank Nifty retains its strength and momentum.

Despite the bullishness, it is ideal to be nimble-footed while trading the index as the Nifty again enters its overbought state with an ongoing negative divergence, as indicated in its key strength indicators. Hence, expect stock-specific outperformance to continue as rotation remains healthy.

Buy MCX

A breakout has been witnessed on multiple time frames but the most prominent is the weekly Inverse Head & Shoulder formation with neckline around Rs 1,390.

The pattern reconfirms that the strength in the ongoing upmove will continue, with the pattern target placed around Rs 1,880. From a trading perspective, longs can be added with a stoploss below Rs 1,350.

Buy Amara Raja Batteries

Amara Raja continues to display strength for the fourth consecutive month as it marches towards the upper end of its ongoing long-term channel. The recent breakout from the continuation pattern target also coincides with the larger degree pattern. Hence, momentum longs can continue until Rs 705 is maintained from hereon for an initial target zone of up to Rs 735-740

Sell Bharti Infratel

We expect the short unwinding cycle to continue as Infratel remains under pressure post its breakdown around Rs 220 zone. On the daily scale, a falling there formation will be confirmed once the stock slips below Rs 197. Trading shorts can be maintained with a stoploss above Rs 208 for a move towards Rs 180 zone.