Nifty outlook and stock picks by Sameet Chavan: Buy BPCL, sell Axis Bank

Price-wise, BPCL's stock seems to have a sturdy structure on the weekly time frame and, looking at the lower degree chart, the recent price correction appears to have completed

Nifty outlook

We started the proceedings last week on a flat note on Monday as there was no major trigger on the domestic as well as global front. However, as the week progressed, the markets started drifting lower. The real momentum was seen in the latter half as we saw Nifty sliding below 14,400 on Friday. But on the same day, we witnessed a smart recovery in the market to not only pare down all losses but also to close with more than 150 points gains. Due to this tail-end surge, the Nifty was well off its morning’s low to reclaim the 14,700 mark.

Since the last few days, key indices were range-bound, but, if we meticulously observe the price action of individual stocks (especially from the F&O universe), some sort of distribution was clearly visible. This week’s decline in Nifty and other key indices in the latter half was the outcome of the overall selling happening in the individual stocks. In the process, the index managed to fill the gap of 14,470 – 14,330 created on the following day of Union budget February 02, 2021). Since, market was a bit oversold, some sort of rebound was evident; but the kind of v-shaped recovery we witnessed, was clearly unexpected to us. Hence, although our recent cautious stance has played out well, we need to see how market behaves in the first half

of the forthcoming week. On the higher side, 14,875 – 15,050 are the levels to watch out for; whereas on the lower side, 14,450 – 14,350 becomes a key support zone. The major corrective move is possible only below 14,330, until then expect the index to remain in a broad range.

Traders are advised to be stock specific for a while and till the time, Nifty does not surpass 15,050, we are likely to see some pressure at higher levels. Hence, one should remain light and trade with proper risk management as we step into the monthly expiry week.

Stock recommendations:

NSE Scrip Code – BPCL

View – Bullish

Last close – Rs. 432.95

Justification – Overall, the entire PSU space has been buzzing since three months and within this, the marquee OMC counter has been in a limelight every now and then. Price-wise, the stock seems to have a sturdy structure on the weekly time frame and, looking at the lower degree chart, the recent price correction appears to have completed. The stock price managed to find

support at the previous multiple resistance zone around 424. This coincides with the ’89-day EMA’ as well and hence, we expect the stock to resume its upward trend. We recommend going long on dips for a target of Rs.448 in coming days. The strict stop loss can be placed at Rs.418.
 

NSE Scrip Code – CADILA HEALTHCARE

View – Bullish

Last close – Rs. 425.40

Justification – The entire PHARMA universe has been quiet since last couple of months, in fact, many had undergone a decent price as well as time wise correction. ‘CADAILA’ was not spared in this as the stock prices saw a decent correction of nearly 20 per cent from recent highs. Now, if we take a glance at the daily chart, we can see prices rebounding precisely after sliding tad below its ‘200-day SMA’. With the smart recovery on Friday, the daily close happened above this key moving average. Also, the candle resembles a ‘Bullish Hammer’ pattern. Hence, looking at these evidences, the possibility of some relief is very much on cards. We recommend going long on a decline around 418 for a target of Rs.445 in coming days. The strict stop loss can be placed at Rs.407.
 

NSE Scrip Code – AXIS BANK

View – Bearish

Last close – Rs. 726.25

Justification – The banking has been the major culprit in all intermediate corrections and this time although, BANKNIFTY has been underperforming the benchmark, this private banking name has managed to remain sturdy. However, since the last few sessions, we are seeing some signs of fatigue and the same is clearly visible on charts. The stock prices slipped below its

recent consolidation range and although it has managed to recover fair bit of lost ground on Friday, we expect the stock to face stiff resistance around 730 – 735. We recommend going short for a target of Rs.700 in coming days. The stop loss can be placed at Rs.746.
Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking. The analyst may have positions in one or more stocks. Views are personal.