On August 28, markets saw a strong close at a new six-month high. The same optimism was carried on August 31 too as markets opened with a good bump up, owing to cheerful mood across the globe. Everything looked hunky dory but all of a sudden, the massive sell off triggered in our markets after the news of India-China clash at the border. Eventually it turned out to be one of the terrible days in the recent past. Post this, markets consolidated and gave a minor recovery for next three trading sessions.
However, on September 4, the selling once again resumed to close almost at the lowest point of the week.
On the first day, the geopolitical concerns became the caveat in dragging markets lower and then a sharp profit booking in US markets weighed down heavily. All in all, our markets needed some reason to correct and it was provided by all these developments. The velocity of the fall after a relentless run is generally scary and hence, we were advocating some caution since last a couple of weeks. Because it is very difficult to react to such sharp U-turns and we may remain caught on the wrong side. Hence, sometimes it’s better to be a bit proactive.
Looking at the technical set up, with last week’s price activity, we can see a formation of ‘Bearish Engulfing’ pattern on weekly chart. It is generally considered a reversal pattern and a breach of 11,300 would result into a confirmation of the same. In this case, we may see immediate decline towards 11,150-11,000-10,870 this week. However, it is important to take a note that since the larger degree trend is strongly up, we would consider any decline as a corrective move within the uptrend and hence, it will nowhere be closer or similar to March’s mayhem. In fact, it would certainly provide better opportunities to accumulate quality propositions for a longer run.
In case, if market witnesses some bounce back, 11,500-11,650 remains to be a stiff hurdle. Also, it would now be very difficult for Nifty to surpass 11,800 soon. It is most likely that we would either see some price or time wise correction before Nifty heading towards pre-Covid levels. Let's see how things pan out and since a lot of news flow on domestic as well as global front is likely to drive short term moves, we advise traders to keep a regular tab on these developments. Also, in our sense, we are likely to get decent stock specific opportunities on both sides and hence, it’s better to follow them by maintaining strict stop losses.
NSE Scrip Code – UBL
Last Close – Rs 1,128.80
Justification – With a lot of things opening up after the nationwide lockdown of 4-5 months, the government relaxed bans on liquor and hence, some of the stocks from this space looked extremely jubilant last week. UBL which was in a base building process since last couple of months, took a giant leap at the middle of the week. Stock prices confirmed a price breakout from multiple hurdles along with gargantuan volumes, indicates immense buying interest in the stock. Last week, the stock prices traded weak in the midst of a broader market sell off; but the overall structure remains sturdy and hence, the decline can be used to go long for a target of Rs 1,200 over the next few days. The stop loss can be placed at Rs 1,074.
NSE Scrip Code – ICICIPRU
Last Close – Rs. 421
Justification – In last three weeks, this stock went through some time wise correction. In fact, there was some gradual profit taking was witnessed from the recent high. On Monday, prices breached its 200-SMA convincingly for the first time in the recent past. Post the pullback move towards the resistance zone, the selling resumed on Friday as the stock tanked towards its key support. The way prices are shaped up, we expect the correction to extend in coming days. Hence, one can look to go short for an extended profit booking towards Rs 400 and the stop loss can be placed at Rs 434.
Dsiclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking. The analyst may have positions in one or more stocks. Views are personal.