Bulls defended the territory, better to take one step at a time
The previous week’s tail-end surge was followed by a good start on Monday; but the overall trading range was extremely narrow. We continued upward momentum on the following day as well. In fact, on Wednesday, markets started with a bang, at a three-month high. But, all of a sudden, the indices nosedived from higher levels. This turned out to be a profit booking after a consistent rally of nearly 800 points in a span of 5-6 days. Last couple of days’ price action was more of a range bound action with a positive bias. Eventually, Nifty ended the week by adding over a per cent to the previous weekly close.
During the midst of the week, we witnessed a reality check at 10,500, and fortunately, the profit-booking did not extend too long. In fact, prior to Friday’s session, we were hoping Nifty not to close below 10,300-10,250 levels. Because this would have resulted in a formation of ‘Shooting Star’ pattern that too near ‘200-SMA’ on the weekly chart. However, due to Friday’s close, we can see a formation of ‘Spinning Top’ pattern and this generally indicates neutral bias i.e. neither the bulls dominated, nor the bears had the upper hand. Ideally, a close beyond 10,500-10,550 would have suggested a stronger closer but nevertheless bulls, the markets, somehow, managed to defend their territory. Now, this week’s low of 10,194 would now be seen as a key support and as long as we are above it, there is no reason to worry. So, practically speaking, traders are advised to trail stop losses higher at this level and a breach of this would result in a strong bout of profit-booking in the market.
On the flipside, we expect the rally to continue and a move beyond 10,500 would certainly unfold the next leg towards 10,700 - 10,850 levels. Since, there is a cluster of resistance at every 200 points up move from hereon, traders are advised to take one step at a time and should ideally avoid carrying aggressive bets overnight.
1. NSE Scrip Code – JAMNA AUTO
View – Bullish
Last Close – Rs. 34.15
Justification – Of late, we have seen a lot of buzz in the broader market and some of the counters have soared. Clearly, the Auto-ancillary space has been one of the brightest spots and along with its peer counters, ‘Jamna Auto’ saw a smart rally last week. Due to Friday’s surge, the stock price confirmed a breakout from bullish ‘Cup and Handle’ pattern on daily chart. If we look at the volume activity, it has risen substantially, nearly twice or thrice of its average daily volumes. In addition, the ‘RSI-Smoothened’ oscillator is heading northwards, indicating the continuation of the rally. We recommend this stock for a target of Rs.37 in coming weeks. Traders can keep their stop losses at Rs.658.
2. NSE Scrip Code – MINDTREE
View – Bullish
Last Close – Rs.949.10
Justification – The IT sector was in a quiet consolidation mode in the recent up move and, finally, during the last week, prices started coming out of a slumber. This stock, after trading in a broad range of 840 - 940 has finally broken above the higher range, confirming a bullish breakout. The said breakout is supported with good increase in volume. In addition, prices have closed above higher range of Bollinger band, indicating a strong trending up move after its recent consolidation. Key averages and oscillators are positively placed, supporting the buy call. One can look to go long at current levels for a target of Rs.1,004 over the next 14 sessions. The stop loss should be fixed at Rs. 916.
Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking Ltd. Views are personal.