Nifty outlook & two stock ideas by Sameet Chavan of Angel One

Markets had a soft opening to the week last Monday taking into consideration some nervousness on global bourses. However, the things settled thereafter as we witnessed a strong close above 17,900 for the first time ever. This was followed by back to back excellent trading sessions for our market and in the process, the Nifty not only reached yet another milestone of 18,000 but even surpassed it comfortably to mark new highs beyond 18,300. After two weeks’ slight pause, Nifty finally resumed its upward trajectory to add more than a couple of percent to the mighty bulls’ kitty.

Despite being a truncated week, the bulls made their presence felt in all four trading sessions. Importantly, the banking space provided a helping hand when it was the most needed as the IT basket was on a shaky ground on the back of weak set of numbers from TCS. In fact, as the week progressed, the buying momentum accelerated in the banking counters which led the benchmark to such record highs. This rally has been relentless in nature and we must admit that it has overshot our expectations by a fair margin. But this is how market functions: It is always full of surprises and it moves the way it wants to. Now since we are trading in an uncharted territory, it would be very difficult to project higher levels. Hence, 18,500 is to be seen as immediate psychological level and thereafter every 100 points round figure is to be considered as next level.

As far as supports are concerned, 18,200 followed by 18,000 are to be seen as strong supports for the coming days. Here, 18,000 holds key for the bulls and as long as it is defended comfortably, the bulls have no reason to worry about. Although the trend has been extremely strong, we reiterate that one should avoid getting complacent at such elevated levels. The pragmatic approach would be to go one step at a time and try to avoid aggressive bets overnight. The stock specific action continues and hence, traders are advised to keep focusing on such bets.

Stock recommendations:

1. NSE Scrip Code – HBL POWER

View – Bullish

Last Close – Rs 54.70

Justification – This small ticket size counter has been consolidating since the last four months now. However, all this while it never lost its positive posture. On Thursday, we finally witnessed a huge breakout from this congestion zone. If we look at the volume activity, we can see sizable volumes to support this price action. In addition, the ‘RSI-Smoothened’ oscillator on the daily chart has surpassed the 70 mark, which may provide impetus for the next leg of the rally. We recommend buying in a range of Rs 54 – 53.50 for a short term target of Rs 61. The stop loss can be placed at Rs 49.80.

2. NSE Scrip Code – UNITED SPIRITS

View – Bearish

Last Close – Rs 888.60

Justification – The liquor stocks are on a roll since the last few months and this has been one of the leaders in this space. In the week gone by, the stock finally saw some fatigue at record highs. There was no major price destruction as such but we can see early signs of some profit booking after a relentless run. On the daily time frame chart, the stock prices confirmed a daily close below ‘5 day EMA’ for the first time in last couple of months. In addition, the ‘RSI-Smoothened’ oscillator has given a negative crossover in the extreme overbought territory. Traders can look to short this counter on a small bounce for a short term target of Rs 850. Since the overall trend has been strongly bullish, it’s advisable to maintain a strict stop loss at Rs 911.

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Discalimer: Sameet Chavan is Chief Analyst- Technical & Derivatives, Angel One. Views expressed are personal.