Things looked extremely bleak at one point of time, but fortunately, we witnessed enormous buying interest at lower levels which kept on accelerating till the closing point of the day. During the remaining part, index had some volatile moves on both sides but fortunately due to late recovery on Friday, Nifty managed to reclaim the 11,000 mark on a closing basis.
The closing beyond 11,000 was crucial not only because it’s a psychological junction; but also in terms of technical, because with this we concluded the August month with some important clues left behind for us. Let’s see what we are exactly referring to. (i) recent correction got arrested around the 61.8 per cent retracement (10,637) of the previous up move, (ii) we could see a formation of ‘Bullish Piercing’ pattern on daily chart on August 23, (iii) Friday’s recovery happened from key retracement ratios and formed a ‘Bullish Hammer’ and most importantly, (iv) Monthly candle concluded above ’20-EMA’, which remained defended on a closing basis since March 2016 and depicts a bullish ‘Dragonfly Doji’ pattern.
We were hopeful since last couple of days but now looking at these multiple observations, it has certainly fuelled our conviction level. Yes, index is struggling to surpass the sturdy wall around 11,150 – 11,200, but we will not be surprised to see it crossing in the coming week to extend this rally towards 11,350 – 11,475. Hence, we advise traders to refrain from creating shorts and should now adopt a buy on decline strategy for a while. On the downside, 10,950 followed by 10,874 would now be seen as immediate supports.
This has been a key mover in the capital goods space since last many years. Importantly, last 10-12 months have been excellent for this stock as it has been bucking the trend and has been reluctant to succumb to the broader market destruction. Yes, recently we saw some cooling off in this counter and went through some consolidation phase as well. But Friday’s close looks encouraging now as it has managed to give a convincingly close beyond recent hurdles on weekly basis. The volume activity was also supportive to this price action and hence, we expect resumption of a higher degree uptrend very soon. We recommend buying this counter for a target of Rs.1308 over the next few days. The stop loss should be fixed at Rs 1,154.
After a long underperformance, finally we can see some respite in the Auto and Auto ancillary space. This has been one of our preferred picks of late from this basket and certainly it has lived up to our expectations as we can see a colossal intra-week rally of over 12% from its crucial multi-year supports. Still there is nothing much changed and we expect further legs to unfold going forward. On Friday, we witnessed some breather but with a broader perspective, one should construe this as a good buying opportunity. Going with all the above evidence we recommend buying this stock at current levels for a target of Rs 543 over the next few days. The stop loss can be placed at Rs 486.
Disclaimer: The analyst may have positions in one or all of the above mentioned stocks.