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A fall below 13,400 may push Nifty towards 12,900, says Sameet Chavan

On the daily chart, we can now see a 'Dragonfly Doji' pattern
Mild hiccups at record highs, avoid aggressive longs overnight

The merry run at the bourses has continued across the globe for about a month and a half now, and markets are just continuing their gravity defying moves. Last week, our markets kickstarted the week on a flat note but immediately resumed its upward momentum. For the subsequent two trading sessions, the rally continued and in the process, Nifty kept posting new record highs one after another. The similar sort of one sided move was missing in the latter half of the week as markets saw some volatile swings to test the 13,400-mark. Eventually, due to late recovery on both the occasions, Nifty managed to close tad above 13,500 on Friday with weekly gains of nearly two per cent.

Our markets have reached yet another milestone of 13,500 with ease and few heavyweight themes did well to guide markets at new record highs. Since we are trading in an uncharted territory, sky's the limit for our market. That said, we have now reached the extreme zone, at least for the current vertical move. With a broader view, 14,000 and beyond levels are very much possible, but for the time being 13,500 - 13,600 are the extreme levels as per few key Fibonacci ratios.

Let's see why these levels are considered important. The 'Golden Ratio' (161%) on the 'Price Extension' of the recent previous up move is placed at current levels. This level coincides with the 200% ‘Price Extension’ of the first up leg from March lows. More importantly, if we connect all important highs from March 2015 on the monthly chart, we can see a 'Multi-year Upward Sloping Trend Line' precisely converging around the same levels. Hence, some cooling off around this crucial junction cannot be ruled out. 

Yes, we agree to the fact that a strong trend up or down, doesn't necessarily follow any theory. But there is no harm being a bit conservative at times. Hence, since the last 3 - 4 days, we have been continuously advising booking profits in the rally and avoiding aggressive bets overnight. On the daily chart, we can now see a 'Dragonfly Doji' pattern and with the last two day's intraday swings, 13,400 has become a crucial support. The moment Nifty slides and sustains below this point (which is possible anytime soon), we would see the market experiencing some decent profit booking towards 13,100 – 12,900 in days to come.

Stock recommendation:


View   –   Bullish

Last Close   –   Rs. 83.40

Most of the 'Paint stocks did phenomenally well over the past many years. In fact, in the recent rally too Shalimar Paints remained laggard and did not follow its larger peers. But the kind of price action we witnessed on Friday, it’s time for this stock to show its mettle now.

We witnessed a gigantic bullish candle along with sizable volumes, confirming huge breakout on the daily chart. This led to stock prices traversing weekly ’89-EMA’ with some authority after a long time. Hence, we recommend going long on a decline up to 78 for a target of Rs 98 in coming weeks. The stop loss can be placed at Rs 70. 


View   –   Bearish

Last Close   –   Rs. 1608.75

The entire Cement space enjoyed its strong Bull Run from the March lows. However, since last couple of weeks, these stocks are bit under the weather. We can see beginning of profit booking phase in ‘ACC’ after reaching its previous record highs and in the process, it has finally broken down below its recent multiple support area around 1650. The trend following indicator ‘Super Trend’ has also confirmed its bearishness as stock prices sneaked below it on a closing basis after two months. Traders are advised to sell on a bounce up to 1620 - 1630 for a target of Rs 1,550 in coming days. The strict stop loss can be placed at Rs 1,662. 


View   –   Bearish

Last Close   –   Rs. 1361.05

In the ‘Auto’ universe, this has clearly been the ‘Dark Horse’ this year. Despite March fiasco, this stock managed to clock whopping gains of ~116% YTD, which is a remarkable achievement in tough times. But now with near term view, stock prices looks a bit overstretched and some sort of profit booking is overdue. In fact, if any meaningful decline comes, it should be considered a healthy sign with a broader perspective. If we take a glance at the daily chart, the stock prices slipped convincingly below the ’20-day EMA’ for the first time in last few weeks. This also confirms a small ‘Double Top’ kind of pattern. Hence, some sort of profit booking in coming days cannot be ruled out. We recommend going short for a target of Rs 1,300 in coming days. The strict stop loss can be placed at Rs 1,388. 

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