Nifty Outlook: Don't short but book profit at higher levels

Sameet Chavan of Angel Broking recommends buying HPCL, and shorting Titan and Tata Steel

After an extended weekend, markets opened on a flat note last Monday. During the first couple of sessions, we witnessed some consolidation with Nifty gradually moving towards 17,400. However, the remaining part of the week panned out so well for the bulls as we saw Nifty resuming its upward trajectory to register new highs every day by a fair margin. 

On September 17, the positive momentum was carried over to almost reach the new milestone of 17,800. Unfortunately, it could not keep up with the same momentum as we witnessed a decent profit booking after marking a new high of 17,792.95. Eventually, last week ended tad below the 17,600 mark by adding more than a per cent to the previous week's close. 

Since last few days, the Nifty was trapped in a small range and finally it managed to find some momentum. The trend is extremely strong but honestly, the current move is not giving us comfort at all. We reiterate that when things start to look hunky dory and there are no signs of correction, market surprises. 

Yes, it’s difficult to predict the precise time, but it's always better to be safe than sorry. As of now, we are not advising to short but at least one can choose to keep booking profits on a regular interval and stay light on positions. 

Last Friday’s sharp correction from higher levels is clearly an indication of this and hence, we continue with our cautious stance. As far as levels are concerned, 17,700 – 17,800 are to be seen as immediate hurdles; whereas on the flipside, 17,450 – 17,250 should be treated as key supports. The first sign of real weakness would come only if we start sliding below the lower range.

The banking space had a lion share during the last three sessions as we saw BANKNIFTY coming out of its long slumber phase to post fresh record high. In fact, on Friday, the broader market was sulking after the initial up move; but banking index managed to close in the green. Going ahead, all eyes would be on this heavyweight basket, because if Nifty has to move towards 18,000, this space needs to continue its momentum. 

In addition, the broader end of the spectrum had a fabulous run throughout the week but we saw some decent profit booking in this space as well on the last day, which does not bode well. Hence, we remain a bit sceptical and we expect the picture to get clear in the coming week itself. 

Stock recommendations:

NSE Scrip Code – HINDPETRO

View   –   Bullish

Last Close   –   Rs. 282.95

Justification – Oil Marketing companies have done well recently especially BPCL and IOC who are trading at their 52-week highs. But HINDPETRO has been a laggard and could not move in tandem with its peer counters. Now the way it’s shaped up, we may see some catch up from this counter in coming days.

On the daily time frame chart, the ‘Inverse Head and Shoulder’ pattern is clearly visible and the breakout of the same has been confirmed during the latter part of the week gone by. Looking at the rising values of momentum oscillator, we recommend buying for a short term target of Rs.298. The stop loss can be placed at Rs.274. 

NSE Scrip Code – TATASTEEL

View   –   Bearish

Last Close   –   Rs. 1385.90

Justification – Globally, we are seeing a super cycle in the entire commodity basket.  Hence, along with other commodity related stocks, the metal counters have been benefitted of this optimism. But some of the steel counters started consolidating in last couple of weeks and on Friday we witnessed some weakness in this space.

TATASTEEL was one of the worst performers who has confirmed a trend line breakdown from its key support of 1390 on a closing basis. Traders can look to short this counter on a small bounce for a short term target of Rs.1330. The stop loss can be placed at Rs.1442. 

NSE Scrip Code – TITAN

View   –   Bearish

Last Close   –   Rs. 2095.60

Justification – This stock has been one of the rank outperformers of late and in fact, it has proved its worth over and over again in last couple of decades. Undoubtedly, the higher degree trend remains bullish but with a near term view, we are seeing some early signs of fatigue. 

On Friday, the stock prices suddenly took a nosedive from its record high and eventually closed almost at the lowest point of the day. This may not change the complete trend but at least we may see some decent profit booking in coming days. Hence, traders are advised to short with strict stop loss above Rs. 2152 for a target of 2000. 

===========================
Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives, Angel Broking. Views expressed are personal.