Just a pause before the new high
Trading for the previous week kick started with an upside gap owing to positive cues from the global peers. However, during the remaining part of the week, we saw index struggling at higher levels and at the same time, has been reluctant to fall also. Intraday declines were getting bought and the rallies were eventually witnessing some profit booking. As a result, the index got stuck in a small band of 150 – 180 points with gyration on both sides. Due to tail end correction on Friday, November 8, the Nifty pared down major chunk of its weekly gains to conclude on a flat note.
As we all know, the benchmark index Sensex clocked fresh record highs last week and the Nifty is somehow lagging behind a bit. Last week, we saw several attempts to go beyond all time high of 12103.05. But these attempts turned unsuccessful and with last correction on Friday, we are back to 11900 now. It appears that traders are a bit cautious whenever Nifty surpassed the 12000 mark during the day. Looking at Friday’s close, we need to see how index behaves around 11843. If we see index sustaining below this key intraday support, we may see this profit booking getting extended towards 11784 – 11714 levels. In case of these possible scenarios, we will not consider this as a trend reversal; rather we construe this as a decent profit booking, which is essential for every robust rally. We continue to remain sanguine on the market and expect Nifty to reach new milestones very soon.
Although, index did not do much this week, there were some sectoral themes that played out well and marquee names within these sectors did well for themselves. The Metal and Realty are clearly amongst them and in the initial part of the week; few auto-ancillary names were on a roll. Similarly, we expect such stock specific moves to continue in the forthcoming week.Stock Recommendations:
View – Bullish
Last Close – Rs. 397.95
The entire Metal space has undergone a severe pain over the last many months; courtesy to unfavorable developments on the global front (especially in China). But now, it seems as if the most of uncertainty, global tensions are subsiding one after another and that’s clearly getting reflected in recent price action of these China-sensitive names. ‘Tata Steel’ has been consolidating of late around its multi-year supports and Last Tuesday, we saw first sign of revival.
The stock prices confirmed a breakout above recent swing high which was followed by some mild profit booking. However, last Friday, strong buying re-emerged at breakout points which resulted into a spectacular single day gains of nearly 5%. With this, stock has resumed its northward trajectory and looking at the volume activity, we expect it to extend further in coming days. Thus, we recommend buying this stock at current levels for a target of Rs.425-440 over the next 14 sessions. The stop loss should be fixed at Rs.374.
View – Bullish
Last Close – Rs. 577.05
After a long underperformance, similar to some other beaten down sectors, the Pharma space is also now on the path of some revival. On the daily chart, stock prices have broken above its stiff resistance of 560 which previously acted as a supply zone seven times in the last eight months. The breakout from the same has resulted into a bullish reversal pattern breakout known as ‘Inverse Head and Shoulder’.
The said breakout is supported with a good increase in volume and now after a period of consolidation, the price structure indicates a trending up move in the near term. During the week, we did not see any follow up move, rather prices consolidated in a range. But we believe this is just a pause before the next leg unfolds. Hence, we recommend buying this stock at current levels for a target of Rs.648 over the next few weeks. The stop loss should be fixed at Rs.527.
Disclaimer: Views expressed are the author's own. He may have positions in one or more stocks.