Markets moving away from key moving averages; book profits: Sameet Chavan

We are not at all advising to go against the current trend; but at least taking some money off the table on existing positions is always a good ploy, he says

Two months’ of boredom finally came to an end as market kick started the August month with a bang. There were several attempts made recently to reach the milestone of 16,000 but every time global markets became a spoil sport. This time it was certainly not the case. We had complete support from the global peers which provided impetus to reach the magical figure of 16,000.

The moment we surpassed and sustained above it, there was no looking back. Barring last Friday’s muted session; the Nifty had an excellent week to add more than 3 per cent to the bulls' kitty to hasten towards the 16300-mark. Earlier, the Nifty had a smart recovery from the lower range, but banking index kept sulking throughout. As everyone knew, if Nifty had to reach new highs, it wouldn’t be possible without the contribution of this heavyweight space. Fortunately it didn’t disappoint this time; courtesy to initial charge from the ICICI Bank and then it was all SBI and HDFC Bank’s show to reach the higher boundary of BANKNIFTY around 36,000 – 36,200.

This space cooled off marginally towards the fag end, but despite this, all eyes on this high beta index; because any sustainable move beyond 36,200 would result in an extension of its rally towards its record high. This will certainly bode well for the bulls as we may then see Nifty reaching or even moving beyond the next milestones of 16,400 – 16,500.
 

Although, the upward trend has just resumed after a long consolidation, we would advise short-term traders to start lightening up positions if Nifty reaches the mentioned levels in coming days. Because prices have now started moving far away from some key moving averages on the Quarterly time frame charts. We are not at all advising to go against the current trend; but at least taking some money off the table on existing positions is always a good ploy. As far as supports are concerned, 16,200 followed by 16,000 are likely to be considered as key levels for the benchmark; whereas for BANKNIFTY, the similar zone is visible around 35,500 – 35,200. The momentum traders are advised to take one step at a time and follow a proper risk management.

Stock recommendations:

NSE Scrip Code – HCL TECH

View – Bullish

Last Close – Rs. 1,047

Overall the IT conglomerates had a steady week and they are certainly among the major contributors in lifting the benchmark at record highs. Since the broader market cooled off a bit towards the fag end, it has become really difficult to find potential movers in mid and small cap space for the forthcoming week. Hence, we thought of focusing on safe larger name. As far as ‘HCL Tech’ is concerned, it’s technical positioning is quite encouraging as it’s knocking the doors at its previous record highs. A small push in the upward direction from hereon will confirm its entry in an uncharted territory. Considering the positive posture, we recommend buying for a short term target of Rs.1125. The stop loss can be placed at Rs.1004.

NSE Scrip Code – AMARA RAJA BATTERIES

View – Bullish

Last Close – Rs. 729

This has been one of the worst performing stocks from the Auto and Auto ancillary space. This is clearly visible when we look at Year to Date (YTD) performance of this counter. After shedding more than 20% in seven months, the fall seems to have arrested around its cluster of supports on higher degree time frame charts. On weekly chart, we can see a completion of 50% retracement of the entire gigantic rally from March ’20 lows to January ’21 highs. In addition, we can see a formation of ‘Bullish Hammer’ pattern precisely at this rock solid support. The said pattern has already been activated and hence, momentum traders are advised to buy for a short term price target of Rs.772. The stop loss needs to be maintained at Rs.710.

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Disclaimer: Sameet Chavan is chief analyst- technical & derivatives at Angel Broking. Views expressed are personal.