11430 - A last ray of hope for the bulls
Post the Budget announcement, market participants looked disappointed which triggered a massive sell off, especially in some of the marquee outperformers. To make it worse, we had a decent gap down on July 8 which accelerated as the day progressed. Eventually, the session turned out to be the weakest day of the current calendar year.
For the time being, market has respected this crucial junction but going ahead, it would be important to see how index behaves around it. In case of a breakdown below 11,460 – 11,430, the selloff is likely to escalate to test lower levels 11,250 - 11,230 or even a move towards May lows (11,108) cannot be ruled out. So till the time we are above it, there is still a final ray of hope for the bulls.
However, on the upside, previous support of 11,640 is now acting as a sturdy wall. Hence, if the index has to regain any strength, it needs to convincingly surpass this hurdle of 11,640 - 11,700. Till then, 11,430 – 11,640 would be seen as a crucial range for the index.
At present, traders are advised to stay light and avoid taking any undue risks. As mentioned, any existing longs should be exited if index breaches key support of 11,460 – 11,430 convincingly. On the sectoral front, there were some notable moves seen in the Auto and Metal spaces towards the latter half of the previous week. So if market manages to hold its support, we would see sharp pull backs in these names. Also, midcap index had an encouraging move despite the benchmark tumbled in the final hour. Do watch out for this universe as well.
Jindal Steel & Power
View – Bullish
Last Close – Rs. 139.05
The ‘Metal’ space has been underperforming since last year and a half. However, we have been vocal about this sector possibly undergoing a last phase of its time as well as price wise correction. For the last couple of days, we have been witnessing a strong buying emerging in these names and ‘Jindal Steel’ has managed to give a decent rally after consolidating around its multi-year trend line support of Rs 130. The weekly chart looks extremely encouraging and hence, we at least expect a trading bounce in next few days. We recommend buying for a target of Rs.150 and the stop loss should be fixed at Rs.134.
View – Bullish
Last Close – Rs. 1386
This midcap name has been consolidating of late after having a remarkable calendar year 2018. This consolidation itself is a sign of strength if we compare it with the broader market destruction in last one and half a year. In fact on Friday too, it was clearly bucking the trend. On the daily chart, we are witnessing yet another breakout from the recent small congestion zone and Friday’s up move indicates possibility of giving a decent price move in next few days. Thus, traders can look to initiate longs at current levels for a target of Rs.1445 and the stop loss should be fixed at Rs.1345.
Disclaimer: The views expressed are the analyst's own. He may have positions in one or all of the above mentioned stocks.