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Nifty outlook and stock picks by Sameet Chavan: Buy NTPC, Sell ICICI Bank

Nifty outlook

Markets had a nervous start to the last week as we saw the Nifty sliding below the key support of 14,900 on Monday to even test sub-14,700 levels. However, at the midst of the week, we witnessed a V-shaped recovery in the market, post some dramatic events. Everything looked hunky dory as the February series ended convincingly above the 15,000 mark. But, the market was not done with its twists yet as we saw a huge gap-down on Friday on the back of weak global cues. The selling augmented as the day progressed to eventually mark the biggest single-day loss in last couple of months.  

The one who follows ‘Technical Analysis’, gives more weightage to the price action and importantly it’s the closing point that matters the most than a starting or in between activity. If we relate this concept to the price action in the week gone by, we did see some healthy recovery at the midst; but all this positivity eventually went for a toss on Friday. Fortunately, we did not get carried away by the intra-week rally and waited for the convincing move beyond 15,200 to change our stance. Market failed to surpass it and, in fact, with a massive broad based sell-off, the Nifty has sneaked below its recent swing low of 14,635.05 on a closing basis. This led to a confirmation of first sign of trend reversal in the form of ‘Lower Top Lower Bottom’ on the daily time frame chart. The weekly chart already showed some exhaustion in the previous week as we observed fatigue around the strong resistance zone of 15,380 – 15,500 (which is the 161 per cent ‘Golden Ratio’ of the entire fall from Jan’20 highs to March’20 lows).  

Looking at the price structure, we expect this correction to extend towards 14,200 – 14,000 levels first. Here, 14,000 would be seen as the crucial ‘Trend Line’ support and a breach of this would open up further space towards 13,700 – 13,500. Hence, we would be closely observing how the index behaves around 14,000 in the forthcoming week. For us, the short term tide has turned downwards and the view will remain intact as long as 15,200 is not broken. On the immediate basis, 14,750 – 14,920 are to be seen as stiff hurdles. Traders should not get intimidated if all the above mentioned scenarios turn into a reality because the larger degree uptrend is still very much intact. Since a long time, market has not seen any major correction, so this should only be construed as a much awaited profit booking or a short term corrective phase which is healthy in the longer run. Momentum traders should avoid aggressive or leveraged longs for a while; rather use decent declines to accumulate quality propositions with the broader view. 

Stock recommendations: 

NSE Scrip Code – NTPC 

View – Bullish 

Last Close  – Rs. 107.30 

Justification – The PSU stocks are on a roll since the last couple of months and the way they are shaped up, they appear to perform well throughout this year. ‘NTPC’, which is considered to be a slow moving counter, has shown some interesting signs in the recent past. Looking at the daily and weekly time frame charts, we can see a good ‘Accumulation’ pattern getting developed over the past few months. The stock prices are about to finally come out of the congestion zone and hence, we expect the stock to give a decent move in the coming weeks. Since, the overall markets are poised for some short-term correction, we advise accumulating this stock on declines around 103 – 100 for a target of Rs.118. The stop loss can be placed at Rs.94.50.  

NSE Scrip Code – BAJAJ FINANCE 

View –  Bearish 

Last Close  – Rs. 5,264.90 

Justification – The sell-off on Friday was mainly led by the ‘Financial’ space and some of the NBFC stocks became the casualties in the hammering. This stock had a gradual decline in last couple of weeks but on Friday with nearly 5 per cent cut, it has finally broken down below its recent swing lows. The momentum oscillators on daily chart have turned downwards which may provide some pressure to the prices on any bounce back. One can look to sell on a rally towards 5,320 for a target of Rs.5,080 in coming days. The strict stop loss can be placed at Rs 5,460. 

NSE Scrip Code – ICICIBANK 

View  –  Bearish 

Last Close  –  Rs. 597.75 

Justification – Since the Budget session, some of the marquee banking names just took off and this was clearly one of those leaders. In fact, during the week, this stock managed to lead from the front in the sharp recovery to pull the Nifty beyond the 15000 mark. However, the follow up buying was missing towards the fag end of the week, which eventually resulted in a sharp decline on Friday. The chart structure is very much similar to some of the other financial stocks. On the daily chart, we can see a bearish ‘1-2-3’ pattern with prices trading convincingly below the ’20-day EMA’.  Thus, one can look to sell for a target of Rs.564 in coming days. The strict stop loss can be placed at Rs.615.60. 
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