Top trading ideas for today's trade: Sell Tata Steel, Motherson Sumi

Stock calls and Outlook on Nifty by Sameet Chavan, Chief Analyst- Technical & Derivatives, Angel Broking:

Nifty Outlook: Market entered a corrective phase, stay light

The eight weeks winning streak finally came to an end and no brainer, the major event ‘Union Budget’ became the catalyst for this pause. The inaugural day of the trading week posted fresh high at 11,171.55; but this was followed by some consolidation with a mildly negative bias ahead of the event. On the ‘Budget day’ we saw some volatility but due to tail end recovery the Nifty managed to reclaim the 11,000 mark. This seemed to have become a bull-trap as the index opened lower on Friday and then continued its selling streak throughout the remaining part of the day. Eventually, the intimidating session ended with a massive cut of 2.33%; posting biggest single day fall in percentage terms after fourteen months (i.e. November 11, 2016).

In our recent articles, we had drawn attention towards the important near term junction of 11,100, which was 161% ‘Price Extension’ of the rally seen during 2008 – 10. This point has certainly proved its worth as the index failed to sustain above this mark and finally the much awaited correction was being witnessed. Honestly, speaking, this correction was overdue since last few weeks but as we highlighted earlier also, timing such halts had become a nightmare and probably, market was just waiting for some reason.  Now, if we look at the weekly chart, the ‘Bearish Engulfing’ pattern is clearly visible now and although, recently, there were some whipsaws in the corrective phase, we do not want to neglect this bearish development. For a time being, 11,171.55 would now be seen as a near term peak and for the coming week, 10,840 – 10,878 would act as immediate resistance levels. Any bounce back is likely to get sold into and we expect the index to correct towards 10,597 – 10,500 quite soon. 

On Friday, there were plenty causalities seen in the broader market. Honestly, this is what we generally see on a falling day like this and probably, we may continue witnessing the same in days to come. We have been advising caution since last few days and we continue to do so. Short term traders should remain light and ideally should avoid doing any kind of bottom fishing.

Stock recommendations:

1. NSE Scrip Code – Tata Steel

View  –    Bearish

Last Close  –   Rs 670.45

Justification – Of late, we maintained our cautious stance on the ‘Metal’ space and despite, ‘Tata Steel’ giving series of breakouts, we advised booking longs and going short on the counter. This was mainly on the back of stock reaching its multi-year ‘Golden Ratio’ of 161% around Rs 695 after witnessing stellar moves in last couple of years. Undoubtedly, the longer term bullish trend remains intact but in the near term, we expect decent profit booking happening in it. Generally, we see breakouts failing towards the fag end of the rally and this is what we saw in last few weeks.  Thus, we continue to recommend selling this stock around Rs 682 for a target of Rs 642. The stop loss should be fixed at Rs 706.

2.  NSE Scrip Code – Motherson Sumi

View  –   Bearish

Last Close  –   Rs 352.05

Justification – As we generally see on a falling day, the ‘Midcap’ and ‘Small cap’ counters get the axe and no brainer, there were so many causalities in these spaces on Friday. After enjoying its two-year Bull Run, ‘Motherson Sumi’ started showing early signs of exhaustions and in last couple of weeks; it has already corrected nearly ten percent from its peak. Due to Friday’s fall, the stock slipped below its crucial near term support of Rs 360 on a closing basis. Thus, we expect the hammering to continue in the counter. One can look to sell for a target of Rs 334 by following a strict stop loss at Rs 362.50.

Disclaimer: The analyst may have positions in any or all the stocks mentioned above