Despite early hiccups, markets defended key levels
After an extended weekend, index opened with a big gap down on SEptember 3rd, mainly on the back of escalated trade war between the US and China over the weekend. This development was fuelled by our weak gross domestic product (GDP) numbers and hence, after some consolidation, the selling momentum accelerated at the stroke of the penultimate hour which lasted till the closing point of the day. Eventually Nifty ended with a mammoth cut over 200 points. On the following day, the selling resumed but fortunately things cooled off at a global front, which resulted into a gradual recovery throughout the remaining part of the week.
Now in terms of levels, we are almost unmoved on a weekly basis but the development that happened during the week was encouraging and adds further conviction to our previous week’s optimistic stance. Previously, we had highlighted few notable observations which are hinting towards some hope of relief in the September month. Addition to that, this week we can see a possibility of base shifting higher to 10,746 from 10,637. The weekly charts of Nifty and Bank Nifty exhibits copy book ‘Bullish Dragonfly Doji’ patterns and the Nifty Midcap 50 depicts a ‘Bullish Hammer’ around the cluster of supports. We also did some time analysis for midcap index and as per the historical evidences; the September month is 21st (Fibonacci number) from January 2018 which may possibly turn out to be a reversal point. And now if we try to apply the same theory on Nifty weekly chart, the forthcoming week would be the 21st week in the 8th zone of ‘Fibonacci Time Retracement’. Yes, it sounds extremely optimistic but we remain hopeful and expect the index to initially head towards 11,100 – 11,180.
In fact, we will not be surprised to see this sturdy wall getting demolished quite soon to extend the relief move towards 11,350 – 11,475. On the lower side, immediate supports are placed at 10,867 – 10,816 but the validity of above mentioned pointers remains intact as long as key support of 10746 – 10637 remains defended successfully.
All the above mentioned hypothesis as of now is based on various assumptions but we hope for it to turn into a reality which will bring back wider smile on faces of traders/ investors across the country who are desperate for some revival.
View – Bullish
Last Close – Rs.356.35
Of late, in the initial part of the correction, the stock did not move as per our expectations but now the way it’s shaped up, things look a bit encouraging. Also, the entire metal space has shown life in the week gone by after easing off some developments on the global front; augurs well for the counter. Technically speaking, after consolidating around its multi-year lows, stock managed to traverse its daily ’20-EMA’ for the first time in last two months. This resulted into a confirmation of ‘Dragonfly Doji’ pattern on weekly chart. We recommend buying this counter for a target of Rs.388 over the next few days. The stop loss should be fixed at Rs.337.
View – Bullish
Last Close – Rs. 394.95
Along with the metal universe, the entire ‘Auto and Auto-ancillary’ seems to be gearing up for some relief. Although, it has done well in last couple of weeks, this counter was lagging a bit and now in last couple of days, it is trying to catch up with its peers. On the daily chart, stock is on the cusp of breaking the daily ’20-EMA’ and looking at the rising values of oscillators, we expect it to happen in the forthcoming week. Since it has not done much in the recent past, we expect the relief rally to be sharper in nature. Going with all the above evidence we recommend buying this stock at current levels for a target of Rs.426 over the next few days. The stop loss can be placed at 375.
Disclaimer: The views expressed are the author's own. He may have positions in one or all of the above mentioned stocks.