Profit booking and stock rotation within the key sectors ahead of Futures and Optiond (F&O) contract expiry added some pressure to the index as it slipped below its key swing support zone near 11,460. On the daily scale, the index almost filled the gap area which it left on its way up while galloping towards 11,694. The gap area around 11,400-11,380 is expected to act as a support for the coming session.
Options data also indicates sizeable PE OI concentrations at 11,500 and 11,400 strikes while on the upside 11,600 built up looks difficult to negotiate which could act as an immediate resistance going forward. The decline from the recent high around 11,694 could be a good opportunity to add quality names as the expectation of the existing trend to continue towards 11,780 in the next few weeks remains valid until the index quotes above 11,200 (200 DEMA). Hence a buy on declines strategy should be adhered to participate in the next impending upmove.
Double Bottom formation on the Weekly scale post the decline from 950 zone is a good sign of a reversal in place. On the daily scale, the recent pullback in the last few sessions blends well within the ‘Rising Three’ pattern characteristics. With the ADX now positioned well above 25, a price move above Rs 738 could unlock the pattern potential. Hence we intended to go a long with a stop below Rs 700 for an upmove towards Rs 830.
CMP: Rs 2,070
Breakout from the ‘Falling Channel’ formation on the daily scale exhibits price targets upto Rs 2,250. The recent pullback towards the pattern provides yet another opportunity to add longs with a stop below Rs 2,020 on closing basis. We expect momentum to resume once the stock price breaks above Rs 2,140.
Disclaimer: Views expressed are personal. The analyst may have positions in one or all of the above mentioned stocks.