Watch out 11,260 – 11,200 levels
We had a gap-down opening on Monday by a fair margin on the back of mounting concerns over the trade war between two largest economies, the US and the China. During the entire week, the uncertainty on this development kept looming over on the entire globe and hence, along with global peers, we kept grinding lower to trim nearly four per cent from the previous weekly close, posting biggest drop after October 2018.
Since last few weeks, market is trading in a consolidation mode and was struggling to overcome the 11,800 level, convincingly. May be it was sensing something of this sort, but it’s all easy to comment in the hindsight. All traders had a close eye on the sacrosanct level of 11,549, which gained tremendous respect on last couple of occasions. But, this level got thrashed brutally post this negative development and then the sell-off was evident. In line with this, within no time, we are back to sub-11,300 levels. Now, we would like to highlight few key technical observations.
Prices have now almost retraced 50 per cent of the previous up move and have managed to test the daily '89-EMA’ as well. Going by the weekly time frame chart, this zone ideally should provide a decent support for our markets and hence, if any bounce back has to start, it should probably begin from this crucial zone only. But as we all know, such global developments can be very deceptive. Also, we are heading for yet another mega event on the domestic front i.e. the election verdict on May 23. All these events are likely to weigh heavily on traders’ sentiment and should probably set the path for next move.
At present, the pragmatic ploy would be to stay light and avoid trading aggressively in the market. Going by the broader chart structure, we are still hopeful of some favorable moves post these events. In such difficult times, investors should be prepared with the list of marquee propositions which can be accumulated in this decline.
NSE Code: BEML
Last Close: Rs 842.95
Justification – The price correction started in April from the levels of Rs 1,035 seems to be arrested by the formation of a bullish reversal candlestick pattern known as ‘Morning Star’. The said pattern is witnessed with a good increase in volume and on the strong support levels of 200-DMA. In addition, momentum oscillator i.e. RSI is placed in deep oversold territory and hence a strong bounce from the current levels cannot be ruled out. Looking at the good risk-reward ratio, we recommend buying at current levels for a target of Rs 900 and the stop loss should be fixed at Rs 811.40.
NSE Code: Heidelberg Cement
Last Close: Rs 180.10
Justification – Post the strong breakout seen on the weekly chart in March at around Rs 170 levels, the stock prices slipped into a consolidation phase above the breakout levels. During the week, we witnessed a strong up move in the counter from the lower levels in spite of weakness in the broader markets hinting for outperformance by the counter in the near term. Looking at the positive placement of major moving averages and oscillators, we sense prices have resumed the previous breakout momentum and are likely to march in the northward direction in the near term. We recommend buying at current levels for a target of Rs 204 and the stop loss should be fixed at Rs 167.
Disclaimer: The analyst may have positions in any or all the stocks mentioned above.