11,000 defended on weekly basis, further relief likely
In the midst of global uncertainty, our markets opened lower with a decent margin last Monday. However, Nifty managed to recover some lost ground on the same day to reclaim the 10,800 mark. On the subsequent day, the index followed similar kind of pattern and showed first signs of revival. Despite Wednesday’s weak session, it took off at the stroke of the penultimate hour on Thursday and we saw complete gush in the market to see some sharp short covering moves. This lead was extended on Friday to eventually conclude the week with a smart recovery of more than 300 points from the lowest point.
Fortunately, we managed to defend the 11,000-mark on a weekly closing basis and the recovery started after precisely retesting some key moving averages and Fibonacci ratios. Firstly, the index tested the 61.8 per cent retracement level of the previous up move. This point was coincided with the ’89-EMA’ on weekly chart as well as 161 per cent (Golden Ratio) of the recent small up move from 11,108.30 to 12,103.05. In addition, the ‘RSI-Smoothened’ oscillator on daily chart had reached the lowest level since October 15, 2018. All these key observations were hinting towards the possibility of some relief from the crucial junction of 10,800. Hence, we avoided shorting and in fact kept focusing on some probable short covering candidates. The strategy played out well and we are back above 11,100.
But the real question lies whether the worst is over or not? In our sense, it would be too early to comment on this and although, we have taken a pause at crucial technical cluster of supports, we need to wait for some further confirmation. As of now, one should construe this rally as a relief move and going ahead, 11,200 – 11,300 are the levels to watch out for. If we manage to surpass this wall, the next possible resistance is placed in the zone of 11,450 – 11,500. At this juncture, the pragmatic approach would be to take one step at a time and focus more on individual stocks. On the lower side, the immediate support is seen around 11,062 – 10,975 and with a broader view, as long as we are defending 10,782 – 10,750, there is no reason to worry for.
NSE Code – Motherson Sumi
Last Close: Rs 107.35
Justification – Last one and half a year has been a challenging period for the auto and auto ancillary stocks. This stock has been experiencing relentless sell-off ever since it reversed after clocking record high of Rs 258.01 in December 2017. With extended correction at the midst of the week, the stock retested its 2016 lows of Rs 88.07 and had a sharp recovery to form a ‘Bullish Hammer’ on daily chart on Thursday. On the following day, we witnessed a sharp short recovering rally of nearly 10 per cent and thereby confirms its short term reversal. Considering the price and volume activity, we expect extension of this relief move in coming days. Hence, we recommend buying this counter for a target of Rs 120 and the stop loss should be fixed at Rs 99.
NSE Code – HDFC LTD
Last Close: Rs 2,211.65
Justification – Since the Budget day, we witnessed a massive correction in some of the marquee names that have shown gravity defying moves over the past year and a half. In fact, these are the ones who propelled index beyond the 12,000-mark. ‘HDFC Ltd’ clearly has been one of the handful of stocks. The stock price retested its previous breakout points and has given a stellar recovery in the week gone by. Daily and the hourly chart looks encouraging and considering the overall price development, we will not be surprised to see this stock extending this relief move. Thus, traders can look to initiate longs for a target of Rs 2,285 and the stop loss should be fixed at Rs 2,175.
Disclaimer: The views expressed are the analyst's own. He may have positions in one or all of the above mentioned stocks.