Avoid taking any directional view on markets: Sameet Chavan

Considering the historical trend, 'August' month is known for bigger moves. So it would certainly be interesting to see which direction market decided to move in

Rough global cues hit the markets during the expiry week olast week. The selloff aggravated globally, in early part of last week, which clearly had the rub off effect on our markets. The benchmark index first breached the 15,700 mark and then due to aggravated selling, went on to breach key supports one after another.

At one point, things looked extremely bleak when Nifty was flirting with key support of 15,500. Fortunately, the mighty bulls grabbed this opportunity with both hands; resulted in a V-shaped recovery thereafter to reclaim 15,700 at the close on ;ast Wednesday itself. During the remaining part of the week, markets remained in a slender range by maintaining mild positivity.

It’s been more than a month and half now, the boredom continues in our market. It can easily be seen if we compare the vis-a-vis performance. In fact, if we take a glance at the intra-month movement as well, we can see Nifty trapped in a slender range of 500 points. On Friday, the monthly chart exhibited two back to back ‘Doji’ candles with very small upper and lower shadows. This is clearly a sign of consolidation and market seems unsure of this direction. In such scenarios, one should avoid taking any directional view till the time we do not get a range breakout on either side.

Considering the historical trend, ‘August’ month is known for bigger moves. So it would certainly be interesting to see whether ‘History repeats itself’ or not and if this happens then which direction market decided to move in. As far as levels are concerned, 15,850 followed by 15,950 are the levels to watch out for and on the flip side, the sacrosanct support is placed at 15,550 – 15,450. If breakout takes place in the northward direction then we may not see bigger move; but if it happens downwards, then brace yourself for some tough time.

In the last fifteen months, market has not experienced any meaningful correction and has been enjoying a strong Bull Run. So once we see convincing breakdown below 15450, the possibility of some decent correction thereafter increases. By highlighting these scenarios, we are not trying to create any negativity, rather it would be very handy to know the repercussion of certain developments in advance. Meanwhile, till the time we are stuck in a range, one should take one step a time and continue with stock specific approach by following proper exit strategy.

Stocks recommendation:

BHARTI AIRTEL

View – Bullish

Last Close – Rs. 561.65

Justification – In last six months, we have not seen major action in this telecom giant. After clocking its record highs in the early part of February, stock prices underwent some price correction thereafter. The fall got arrested after meeting the ‘200-SMA’ placed at 520 and then the long consolidation began. Stock prices made several attempts to sneak below this sheet anchor, but all these efforts turned down successfully by the bulls. We may call this development as a good base building process and finally the stock is now out of its slumber phase. During the mid-week, we witnessed a price-volume breakout, indicating further upside in the offing. We recommend buying for a short term target of Rs.592. The stop loss can be placed at Rs.540.

SPIC

View – Bullish

Last Close – Rs. 63.90

Justification – The Fertilizer space has done well over the past few months and this stock specifically outperformed some of its larger peers by a fair margin. The recent up move in the stock was followed by a brief consolidation within the ‘Triangle’ configuration. On Friday, the entire space was buzzing after some favorable news flow and in the process, we witnessed a decent uptick in this stock to confirm a ‘Bullish Pennant’ pattern on the daily time frame chart. Momentum traders are advised to buy for a short term price target of Rs.70. The stop loss needs to be maintained at Rs.61.80.

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Disclaimer: Sameet Chavan is chief analyst- technical & derivatives at Angel Broking. Views expressed are personal.