Market bounced from its lower circuit; likely to face sharp volatility ahead
Market traded with volatility on Friday as it opened with negative sentiments and hit 10 percent lower circuit within a few minutes after opening, but it also recovered quite smartly from the lows of 8,555 and closed on a positive note. Rupee further weakened and closed at 74.0250. With volatile global markets, Indian indices too faced sharp recovery from intraday low. Nifty closed at 9,955.20 adding 365 points. PSU banks, metal stocks traded with positive sentiments whereas media stocks traded with red mark. Nifty bank closed at 25,166.45 adding 1,195.30 points from the previous day’s closing.
As per weekly option data, handful of call unwinding on higher strikes ranging from 10,000 to 10,300 can be seen which shows Nifty is losing its resistance in sub 10,200 zone. 10,500 will act as resistance as maximum OI for the calls is placed here after 11,000 strike. We can witness short-covering move along with addition of fresh position only if Nifty breaches 10,000. Therefore, traders should try to create long keeping close eye on 10,000 as it will act as a make or break level.
We can see a big momentum in following stocks:
Buy: Indian Oil Corporation Limited (Above Rs 93.40)
Target: Rs 102
Stop loss: Rs 88
Stock is forming a reversal pattern on daily charts along with forming long pin bar candlestick. Stock is showing sign of oversold on RSI indicator. Breakout from the level of 93.40 would lead stock to witness more upward movement.
Considering the technical evidence discussed above, we recommend buying the stock above 93.40 for the target of Rs 102, keeping a stop loss at Rs 88 on closing basis.
Buy: Hindustan Petroleum Corporation Limited (Above Rs 202)
Target: Rs 212
Stop loss: Rs 196
Stock is forming a reversal pattern on daily charts along with forming inverted hammer candlestick. It is also showing positive divergence on RSI indicator. Breakout from 202 would lead stock to witness more upward movement.
We recommend buying the stock above 202 for the target of Rs 212, keeping a stop loss at Rs 196 on closing basis.
Disclaimer: Gaurav Garg is Head of Research at CapitalVia Global Research Limited- Investment Advisor. The analyst does not hold position in any of the stocks mentioned above.