Be prepared for wild swings, hopeful of a favourable outcome
Last week’s price action was clearly divided into two parts, first half was the rub off effect of previous week’s turmoil due to US – China trade war and the second half was the hope rally ahead of the exit polls result. On Friday, we witnessed a complete gush towards the fag end, which pushed index significantly higher to reclaim the 11,400-mark on a closing basis by recouping over a per cent from the previous week’s damage.
We are now stepping into a crucial week and since the election verdict is one of the most watched as well as influenced events for our market, people should gear themselves up for wild swings. Since last couple of weeks, global uncertainty has been weighing down heavily on our markets; but now, till the time this event gets over, we may probably be decoupled from the global peers for a while. As we all know, such events are difficult to predict and since they can have a massive impact on near-term movement, one needs take several scenarios into a consideration.
Now, let’s dig into a bit of technical. The Nifty has managed to reverse from the 61.8% retracement of the recent up move and due to this, on weekly chart, ‘20-EMA’ has been successfully defended on a closing basis. Going ahead, 11,600 – 11,800 are the levels to watch out for in the upward direction and on the lower side, 11,286 – 11,050.
The major trend will get confirmed only after Nifty giving a decisive breakout from the broader range of 11,800 – 11,050. But if we just have to guess on one possible direction, looking at current chart structure, we would remain hopeful as long as ‘Multi-Month Trend Line’ support of 11,050 – 10,900 remain unbroken on a sustainable basis. Below this, no brainer, we may see sharp declines and on the other hand, a move beyond the higher end would resume the broader degree up trend.
Going by our recent articles, traders need to remain a bit light on positions and one should rather look to accumulate marquee propositions in a staggered manner. We would like to highlight one notable observation, the ‘midcap index’, which has not participated in last one and half a year, seems to be in a final stage of its price-wise as well time-wise correction. So, in case of favourable outcome, we expect midcap stocks to attract traders’ attention.
NSE Code – HDFC Ltd
View – Bullish
Last Close – Rs 1993.65
Justification – This marquee name has been a consistent wealth creator since almost last three decades in Indian markets. Recently, we witnessed a small pause to this strong multi-year run up. Prices have been oscillating within the boundaries of a ‘Rising Wedge’ pattern since last few months. In the last three-four days, the stock has been attracting strong buying around the lower end of the wedge and on Friday, we saw massive bump up to confirm a small breakout on hourly chart. Since we are heading into a bit of volatile week, it makes sense to be with such steady rank outperformer. Thus, we recommend buying at current levels for a target of Rs 2,040 – 2,050 and the stop loss should be fixed at Rs 1,960.
NSE Code – ICICI Lombard
View – Bullish
Last Close – Rs 1,120
Justification – In spite of the recent turmoil in the broader markets, this stock has been an outperformer by continuously moving in a ‘Higher Top Higher Bottom’ price formation. On the daily chart after a consolidation and witnessing resistance around Rs 1,110 for three times in a month, the stock price has finally broken above the barrier to confirm the continuation of uptrend. In addition, momentum oscillator i.e. RSI after a minor dip has again turned up, confirming a bullish crossover with its smoothened moving average. Looking at all the above evidence, we sense a strong northward move in the near term. We recommend buying at current levels for a target of Rs 1,218 and the stop loss should be fixed at Rs 1,064.
Disclaimer: The analyst may have positions in any or all the stocks mentioned above.