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Nifty Outlook
Market takes a breather around 200-SMA
The Nifty started the proceedings with a decent upside gap on Monday, owing to favourable cues from the global bourses. However, the momentum disappeared all of a sudden from the market, which resulted into a lacklustre movement throughout the remaining part of the day. It is hard to believe, but the Nifty gyrated in a slender range of merely 160 points during the week. In the midst of all this, the Nifty concluded the week with moderate gains of one and a half per cent.
It has been a stellar Bull run for our markets since the March lows and markets never looked back to reach the crucial zone of ‘200-SMA’ on daily chart. The kind of lethargic activity we witnessed in the week gone by was quite evident, because the market has seen a relentless move without any major halt in between and has reached such a crucial junction. Firstly, as mentioned, the key moving average of 200-SMA on a daily chart. This coincides with the Weekly 89-EMA as well as monthly 20-EMA and hence, the bulls had to respect them. Ideally, if the market has to correct, this is the perfect zone from where it can do so. In fact, in the previous article, we had clearly advocated booking profits in the ongoing rally in the zone of 10,700-11,000 and we continue to do so, at least for momentum traders. But by no means, we advise going short on the market because the momentum in individual stocks is still strong, and more importantly, we are seeing a consensus opinion about the market correcting from current levels. As we all know, when everyone expects a fall, it never comes, and vice versa. So, in our sense, the Nifty would first surpass the 10,850 mark and head towards the 78.6 per cent retracement zone of the entire fall i.e. 11,000-11,200, where we can actually see some profit-booking taking place. If consensus view has to fail, this possibility cannot be ruled out.
Any assumption needs a proper exit strategy if it does not work as per the expectation. Hence, in this scenario, the hypothesis remains valid as long as the crucial support of 10,660-10,560 remains intact. A breach of mentioned supports would certainly trigger a decent profit-booking in the market and hence, one should keep a tab on all the mentioned possibilities and key levels. It would be important to highlight that the banking space holds a key in all this and hence, all eyes would be on its heavyweight constituents as well.
Stock recommendations:
1. NSE Scrip Code – SUNTECK REALTY
View – Bullish
Last Close – Rs. 197.25
Justification – After undergoing a massive price correction in the period of February to May, the stock price slipped into a consolidation phase. Looking at the recent price and volume activity, the consolidation in the last couple of months can be construed as a base building process. If we look at the daily time frame, the stock prices are well poised for a strong up move in the near term. Hence the rising volume activity around the breakout point indicates possibility of surpassing crucial short-term hurdles. We recommend this stock for a target of Rs.212 in coming weeks. Traders can keep their stop losses at Rs.187.
2. NSE Scrip Code – LAURUS LABS
View – Bullish
Last Close – Rs.597.90
Justification – The entire Pharmaceutical space finally came out of its long 5-year slumber phase in the month of April. Since then, there has been no stopping it, and one after another, most of the stocks from this basket are soaring as if there is no tomorrow. If we look at it in the hindsight, such strong run up was quite evident, because stocks are in the process of compensating for such a long period of underperformance. This stock despite a massive run up in the recent past, has caught our attention as we are witnessing a price breakout from multi-year highs along with a decent rise in volumes. Hence, we recommend a buy at current levels for a target of Rs.628 over the next 14 sessions. The stop loss should be fixed at Rs.578.20.
Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking Ltd. Views are personal.
