Stay light; keep an eye on key Nifty levels: Sameet Chavan of Angel Broking

Nifty outlook

Last week, trading started on a flat note but as the week progressed, we witnessed a gradual up move in the market. The optimism in global peers (especially the US bourses) was the main catalyst behind this strength in our markets. Almost each session during the week started with a decent upside gap and importantly, it managed to hold on to it. The similar sort of strength was visible on Friday as well at the opening as Nifty was very much on the move towards its record highs. However, all of a sudden, traders chose to take some money off the table and hence post the mid-session, we witnessed a sharp decline to not only pare down all gains but also to sneak well inside the negative terrain.

Barring the second half of Friday, market almost had a unidirectional move throughout the truncated week. However, post the gap up, we did not see any major action in indices as they kept oscillating within a small range by maintaining their positive posture. The real action was seen in individual themes which also were missing on Friday. Now with Friday’s move, 15,200 – 15,400 has become a sturdy wall for Nifty and it would really be a daunting task surpassing this in the absence of any major trigger on the global as well as domestic front. On the flipside, the key support is placed at 14925 – 14850. A sustainable violation of these supports would lead to extended correction and in that case we may see Nifty sliding towards 14,700 or may even test recent swing low of 14,467. If we meticulously observe the hourly chart, a breakdown from the ‘Rising Wedge’ pattern is clearly visible, which certainly does not bode well for the bulls. All eyes would be on the global peers as they play a vital role in dictating the near term direction for our market.

On Friday, most of the sectoral indices, too, saw some decent profit booking. The banking and midcap indices are placed at a crucial support. It would be interesting to see how they behave in the beginning of the forthcoming week. Apart from this, the ‘Volatility Index (VIX)’ which had cooled off and sneaked below the 19 mark, again surged to reclaim the 21 level. Further spike in this fear index could lead to higher volatility in our market. Hence, traders are advised to stay light and should keep a close tab on all the above mentioned levels.

Stock recommendations:

NSE Scrip Code – Delta Corp

View – Bullish

Last Close – Rs. 188.30

Justification – The stock has seen a spectacular recovery since March lows and in last few weeks, it has gained tremendous momentum. On the monthly chart, the stock has finally come out of the ‘Bear Phase’ after a long time. We can see prices convincingly traversing and staying beyond the ’89-EMA’ level of 148 for the first time after February 2020. If we take a glance at the lower time frame chart, we can see prices rapidly moving higher along with sizable volumes. Thus, any decent price decline would be a great opportunity to accumulate this stock. We recommend going long on dips for a target of Rs.224 in coming days. The strict stop loss can be placed at Rs.163.

NSE Scrip Code – SBI

View – Bearish

Last close – Rs. 381.10

Justification – The banking has been the real charioteer since the budget day and PSB giant ‘SBI’ has given some phenomenal moves in such a short span. Undoubtedly, the larger picture still remains bullish for the stock but with a short term view, it seems to have lost its momentum. On Friday, the stock prices closed below 20-day EMA for the first time in the

recent past. Importantly, on the hourly chart, we can see prices sliding below ‘200-SMA’ which we believe is a sign of weakness. Hence as a momentum trade, we recommend taking a punt on the short side for a target of Rs.358 in coming days. The strict stop loss can be placed at Rs394.

NSE Scrip Code – HINDALCO

View – Bearish

Last close – Rs. 330.20

Justification – Commodities across the globe have been enjoying a strong Bull Run over the past six months. Last week finally we witnessed some healthy correction in ‘Metal’ prices after a long time. This had a rub off effect on the metal counters here. For ‘HINDALCO’, this profit booking precisely happened after reaching a key Fibonacci ratio of 161% (Golden Ratio) placed around 350. On the daily chart, we can see prices closing convincingly below ‘5-EMA’ along with the ‘Bearish Crossover’ in ‘RSI-Smoothened’ oscillator. Also, due to previous week’s late correction, the weekly chart depicts a ‘Shooting Star’ pattern, which has confirmed due to Friday’s correction. We continue to recommend going short for a revised target of Rs.310 in the coming days. The stop loss now can be placed at Rs.341.
Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking. The analyst may have positions in one or more stocks. Views are personal.