Stock calls and outlook on Nifty by Sameet Chavan, Chief Analyst- Technical & Derivatives, Angel Broking:
Traders keenly awaiting breakout from recent congestion
Last Friday’s sharp recovery was followed by a gap up opening on Monday, citing positive cues from the global peers. However, the kind of follow up buying was needed after such head start, was clearly missing. Hence, we saw restricted moves on the same day and in fact, throughout the remaining part of the week. There were a couple of attempts made to break this range on either side, but index failed to do so and eventually closed at the midpoint of the weekly range by adding over six-tenths of a per cent from the previous week’s close.
The entire week was boredom for the traders’ fraternity as we saw Nifty consolidating in a slender range of merely 140 points, which is way below its average weekly range. Market participants were keenly awaiting a decisive breakout from this range, but every attempt (on both sides) eventually turned unsuccessful. Technically speaking, prices have been vacillating within the boundaries of a ‘Triangle’ as well as the ‘Diamond’ pattern and we are very close to the apex point. With reference to intra-week articles, when prices approach the apex point, we tend to see a breakout in either direction and thereby would widen the trading range as well. As a trader, one must keep a close eye on two key levels i.e. 10870 on the higher side and 10733 on the downside. Considering the overall development in the broader market as well as the heavyweight banking basket, our inclination is more on the positive side. A move beyond the higher end of 10870 would unfold the next leg of the rally towards 10970 – 11150 levels. However, in case of a breach below 10733, this would certainly not bode well for the bulls.
In such scenarios, one should wait for a confirmation to place aggressive bets. Until then a prudent strategy would be to focus on individual stocks by following a proper exit strategy.
1. NSE Scrip Code – Biocon
View – Bullish
Last Close – Rs. 642.50
Justification – This stock has been a rank outperformer within the ‘Pharmaceutical’ space since last three years. Recently, despite some of the larger peers undergoing severe pain, this stock stood firm and consolidated for nearly three months around its all time high. Now, with Friday’s strong up move, the stock is showing early signs of strength and is now gearing up to resume its larger degree up trend. Hence, we recommend buying this marquee name for a positional target of Rs.715 in coming weeks. The stop loss can be placed at Rs.600.
2. NSE Scrip Code – Max Financial Services (MFSL)
View – Bullish
Last Close – Rs. 454.75
Justification – Last 8 – 9 months have not been good for this midcap counter. Of late, we witnessed a notable recovery from lower levels and in the week gone by, the stock prices finally managed to confirm a breakout from the ‘Multiple resistance’ zone around 450 along with significant rise in volumes. Also, on last several occasions, the stock prices were struggling to traverse this barrier of ‘200-SMA’, but on this occasion it has successfully managed to do so with some authority. Hence, one can look to go long for a target of Rs.484 in coming days. The stop loss can be placed at Rs.438.
Disclaimer: The analyst may have positions in any or all the stocks mentioned above.