Stay light as Nifty nearing crucial hurdles: Sameet Chavan of Angel Broking

Nifty Outlook

We inaugurated the week on Monday on a flat note; however, right from the word go, markets looked a bit depressed and as a result, we witnessed sustained selling throughout the day. Eventually, the Nifty marked the weakest session in the recent past. However, the ‘200-SMA’ level of 10,870 acted as a sheet anchor for the bulls and despite the strong selling momentum there, Nifty managed to hold this sacrosanct support. The optimist traders somehow managed to sail through this difficult session and hence, with the help of positivity across the globe, our markets, too, started rebounding sharply. Post the smart recovery on Tuesday, the index consolidated by maintaining its positive posture to conclude the action-packed week tab above the 11,200-mark. 

In our opinion, the way markets are placed, this week would be quite crucial and hence, one should keep a close eye on a few key levels. Although the market has managed to recover well, it would be a daunting task to surpass the sturdy wall of 11,300-11,350. Till the time it is not conquered successfully, we advocate some caution. Let’s understand, technically, why this should be considered an important junction. Firstly, the 78.6 per cent retracement of the entire fall from 12,430.50 to 7,511.10 comes around it. Secondly, the 100 per cent ‘Price Extension’ of the first up leg (7,511.10 - 9,889.05) from 8,806.75 precisely coincides around 11,300-11,350. And now, we are standing at the pullback level of the ‘Parabolic SAR’ which has been following the entire uptrend, has finally given some sign of weakness (due to Monday’s negative close) for the first time in the entire up move. Considering all these observations, we advise traders to stay light and should ideally take some money off the table. On the downside, a move below 11,100 would lead to immediate correction towards 10,950 – 10,880 levels. 

Markets were on recovery mode first and then remained in a slender range of 150 points for three sessions. Looking at the benchmark index, it might appear a boring week (especially the second half); but if we meticulously observe the price action in the broader markets, we would rate it as one of the finest weeks for individual stocks in the last few weeks. Finally, on Friday, the NIFTY MIDCAP 50 index posted a smart rally to surpass its recent hurdles. Hence, traders are advised to stay focused on individual stocks this week; but, aggressive positions should be avoided till the time important levels are not surpassed convincingly. 

Stock recommendations: 

NSE Scrip Code – BERGER PAINTS 

View  –  Bullish 

Last Close  –  Rs. 555.15 

Justification – This stock has been consolidating for the last one and half a month along with its peer counters. However, on Friday, we witnessed stellar moves in this space. ‘BERGER’ and ‘ASIAN PAINTS’ both have identical chart structures; but, looking at the placement of ‘RSI-Smoothened’, ‘BERGER PAINTS’ looks a notch better. Price-wise, we can see a decisive breakout happening from recent congestion zone along with sizable volumes, providing credence to the move. Hence, we recommend going long on a decline towards 545 for a target of Rs.580 over the next few days. The stop loss can be placed at Rs.525.  

NSE Scrip Code – MUTHOOT FINANCE 

View  –  Bearish 

Last Close  –  Rs. 926.60 

Justification – Most of the Gold financing companies have been enjoying their dream run over the past three months and this stock has been the clear leader in this space. In the last couple of weeks, brakes seem to have applied to the stock's strong optimism. In fact, on Thursday, post the RBI monetary policy, the stock tumbled from higher levels and in the process, went on to breach its ’20-day EMA’ on a closing basis for the first time in recent months. Although, we witnessed minor pull back on the following day, the short-term chart structure looks weak. Hence, one can look to go short for an extended profit booking towards Rs.1,140 and the stop loss can be placed at Rs.1,265.  

Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking. The analyst may have positions in one or more stocks. Views are personal.