Medium term outlook for market remains positive, says Devang Shah

One should be stock specific & follow the trend with stop loss levels till it reverses

NIFTY

CLOSE- 7733.45 (06.05.2016)

Market extended correction further & closed second consecutive week in the negative territory. It has achieved my first short term targets levels near recent lows. It made a low of 7,678 levels on the Nifty during the week. It managed to hold the lower end support levels of 40 DMA which is coincide with 61.8% retracement levels at the end of weekly trading session. It is trading in very thin range with loss of momentum on both sides. It raises many alternates from wave count perspectives at current levels of market.

Whether it is expanding flat ( sharp correction) or Triangular consolidation ( time wise Correction) from wave count perspectives is still not clear at current levels of market but overall these correction looks good opportunity to buy using a  stock specific approach from medium term perspectives till its proven other wise.

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Market managed to hold the crucial support in earlier instances as well which further raises expanding leading possibility in my mind. Bank Nifty is also showing similar bullish set up. One should watch out market behaviour at these crucial levels. My preferred one is Triangular or Expanding leading possibility from wave count perspectives so far. But conclusively this looks bullish consolidation time wise or price wise from medium term perspective. It may remain in the range of 7,600-7,900 levels on the Nifty for some more time in short term before it breaks out.

Short term outlook for the market remains negative if Nifty trades below 7,890 & we expect targets in the range of 7,600-7,515-7,405 levels in short term. Medium term out look for the market remains positive till Nifty trades above 6,825 levels & we expect targets in the range of 8,336-8,560-8,650-9,120 levels in medium term.
 

Momentum indicators daily KST & daily MACD both are in sell supporting short term trend. Sustain above short term reversal levels will finally confirm further rally towards 8,200 levels on nifty in short term. One should be stock specific & follow the trend with stop loss levels till it reverses.
 

Stock Picks:

M&M: BUY

CLOSE: Rs 1,327.75

TARGET: Rs 1,396
STOP LOSS: Rs 1,300
 

M&M closed weekly in negative territory. It’s out performing in short term. It’s managed to hold crucial support of 40 DMA. Risk reward is favourable to BUY at current levels. 
 

HDFC BANK: BUY

CLOSE: Rs 1,120

TARGET: Rs 1,160
STOP LOSS: Rs 1,098
 

HDFC BANK closed weekly in negative territory. It’s out performing in short term. It’s managed to hold crucial support of 20 DMA. Risk reward is favourable to BUY at current levels. 

Disclaimer: The analyst may have a position in the scrip mentioned above; the views given above are the personal views of the analyst.

The author is Portfolio Manager- PRO TECH-PMS at Sharekhan