Nifty breached below 8,180 (trail stop level) with the RSI reversing from 65 (Upper threshold level of dual distribution theory) & confirmed the termination of the existing up move.
With the weekly RSI now slipping below the 50 mark and the bearish formation on the weekly scale indicates that a sustained move from hereon could push the index lower below 8,000. Hence it is advised to reduce longs.
Buy 8100 PE
Sell 7900 PE
Target Profit: 4200
Stop Loss: 2000
Long unwinding in futures in crucial days of rollovers, rise in India VIX and reduction in Put open interest indicates possibility of further down move in the index. With options premiums being too high at the beginning of November expiry, one should trade this view with a Bear Put spread
Last Close: Rs 574
Target : Rs 605
IT sector continues to outperform & is well placed in the positive quadrant on our sector rotation model. The occurrence of a ‘Bullish Harami’ post the hammer pattern confirmed the support near 565. Fresh longs could be initiated with a stop below Rs 565 for a target upto Rs 605.
Last Close: Rs 1,228
Target : Rs 1,140
Post the pullback M&M saw a stiff resistance near 1290-1300 (61.8% Retracement of its prior move) & 'Bearish Engulfing' on the weekly scale confirmed the weakness. The continuation pattern on the daily scale indicates accelerated move. Fresh short positions could be initiated with a stop at 1270 for a target up to 1140.
Last Close: Rs 1,357
Target : Rs 1,280
On the daily scale the ‘Triple Top’ formation would be confirmed once the stock breaches below 1340. Post the breach we expect Siemens to retest its 200 days EMA placed near 1280. Hence the current setup provides a good reward to risk opportunity to create fresh shorts with a stop at 1395 for a target upto 1280.
The author is Head - Quantitative Research, Motilal Oswal Securities
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