Consolidation despite a breakout from recent hurdles
Despite global markets showing some signs of recovery, last couple of months has been a period of consolidation for our markets. The price activity within this consolidation became lethargic as we saw overall trading range getting contracted in recent weeks. On Tuesday, we finally had a breakout from this congestion zone and thereby confirming couple of price patterns. However, things became more frustrating, as there were no follow up move seen post the breakout. In fact, in last three days, index remained in a slender range but individual stocks underwent some decent price correction. Fortunately, in the midst of this, index managed to defend 10900 on a closing basis.
Looking at the daily chart, we would give more weightage to a price development that confirmed the breakout from a ‘Bullish Diamond’ pattern. This was followed by some consolidation which can be interpreted as a breather or a pullback move before extending the rally. Hence we remain upbeat as long as this price configuration is not violated. Hence, according to us, 10840 and 10780 are to be seen as key support levels. On the upside, we expect Nifty heading towards 10985 first and then to test 11050 – 11150 levels. Such period of boredom can be challenging for momentum traders, but it’s better to stay patient and focus more on individual stocks which are clearly bucking the trend.
This week, movement from banking space was a bit disappointing and since it contributes heavily in benchmark index, it would be very important for banking sector to come out of this slumber. If it does, then mentioned levels in Nifty are very much on cards. Traders needs to keep a tab on all these scenarios and should position accordingly.
1. NSE Scrip Code - Godfrey Phillips
View - Bullish
Last Close - Rs. 951.80
Justification - Last three months have been fantastic for this high beta counter. The daily chart depicts a series of ‘higher highs and higher lows’ and in the process, the stock process finally broke out from the trend line hurdle of 930 with some authority. Importantly, this move was supported by humongous volumes; providing credence to the price action. Post this, the stock prices saw some consolidation but we would construe this as a good buying opportunity. We recommend going long for a positional target of Rs.1020 in coming days. The stop loss can be placed at Rs.938.
2. NSE Scrip Code - Britannia
View - Bullish
Last Close - Rs. 3,171.35
Justification - This FMCG giant has been a steady performer since last many years. Of late, we witnessed a consolidation in this counter which can be termed as a ‘Price correction’ and was overdue since a long time. In the week gone by, we saw some buying interest coming back into the stock and in the process; it has managed to surpass the ‘Falling Trend line’ placed around 3180. This is a sign of strength and going ahead, we expect the stock to resume its long term up trend soon. Hence, one can look to go long for a target of Rs.3460 in coming days. The stop loss can be placed at Rs.3060.
Disclaimer: The analyst may have positions in any or all the stocks mentioned above.