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The week turned out to be a decider as we saw Nifty finally coming out of the recent congestion zone. In fact, we had clearly stated in our previous article that we would see this suspense getting unfolded in the first half. In-line with expectation, the index made things clear on Tuesday after violating the 10300 mark. Some respite in last couple of sessions led to a weekly close well below this key point.
This was clearly an action packed week for our traders as we once again saw some trended move after a consolidation of nearly three weeks. This was clearly on cards; but as we all know, timing such moves is not as easy as it looks in the hindsight. Thus, for a positional trader, it is always a prudent strategy to remain with the trend when it is in the early stages. The near term trend turned lower after confirming the ‘Bearish Engulfing’ pattern at the end of the ‘Budget week’.
In addition, the ‘RSI-Smoothened’ slipped below the 70 mark and now we can see prices closing below the ’20-EMA’ on weekly time frame for the first time after January 2017. Hence, we would continue with our ‘sell on rise’ approach and would expect the index to first slide towards 10033 and then eventually to enter sub-10000 levels quite soon. However, before this, 10140 – 10350 has become a no trade zone for the market. If any negativity has to resume, it would only happen after violating the 10140 mark. The ideal scenario to initiate short position would be either below this crucial junction or after seeing a decent relief rally towards the higher end i.e. 10350 – 10400. As of now, we do not expect the Nifty to surpass these hurdles in coming days.
Since, it is slightly difficult envisaging the time target; traders ideally shouldn’t be too concern about the time; rather keep focusing on mentioned key levels. One should remain light and avoid taking undue risks in such kind of uncertainty. In case of some relief rally within the consolidation range, traders should focus on individual stocks and it would be wise to make timely exits as well.
NSE Scrip Code – Bank of Baroda
View – Bullish
Last Close – Rs. 131.55
Justification – We are not trying to make any kind of bottom fishing as the entire PSU banking basket is like a falling knife since last three weeks. But, the way this stock behaved in last three sessions, we tempted to take a trading punt with a small stop loss. The stock is extremely oversold on daily time frame along with couple of ‘Doji’ candles around the 130 mark. Since, the risk is very small i.e. hardly a couple of percent from current prices, it calls for a good contra-buy for the coming week. In case of a bounce back, we may see a good relief move towards Rs.142 levels. However, considering the recent underperformance, traders are advised to follow strict stop loss at Rs.128 for this trade.
NSE Scrip Code – Ultratech Cement
View – Bearish
Last Close – Rs. 4079.85
Justification – The stock prices consolidated for nearly a month after witnessing a sharp correction from the all time high of 4600. On Friday, there were some hints of breaking below this consolidation range and therefore, confirms a resumption of downward move. Momentum oscillators in weekly time frame are sloping southwards, which adds conviction to the cautious stance on the counter. We advise going short for a target of Rs.3896 for the coming week. One should place a strict stop loss at Rs.4174.
NSE Scrip Code – Tata Steel
View – Bearish
Last Close – Rs. 606.75
Justification – Looking at Friday’s sharp fall, it’s no brainer going short on this counter. But, we have been quite vocal on the probable correction before the budget time and have been advising traders exiting longs around their recent highs. In fact, ‘Tata Steel’ was the one stock that we advised going contra-short around its peak. This was mainly after prices entering its major resistance zone of 161% reciprocal retracement on monthly chart. It is good to see the real impact of this important ‘Golden Ratio’. Now, finally, prices confirmed its bearish trend after breaking down below recent ‘make or break’ level of 632. We continue to expect this stock sliding towards 570 – 550 in days to come. Since, the stock has already fallen a lot, it’s advisable to wait for some bounce back towards 620 – 625, which will make the risk reward ration a bit favorable. One can look to go short around it with a strict stop loss of Rs.647.
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