We had a shaky start to the week as some overhang continued of what we saw previous Friday with respect to the AGR case. In addition to this, things related to coronavirus aggravated which had a rub off effect on all global peers. Thus, the market looked nervous in the first half of the week to retest 11,900 levels. Fortunately, bulls pounced on this opportunity quite aggressively and as a result, we witnessed a V-shaped recovery thereafter to reclaim the 12,000 mark on a weekly closing basis.
We have already mentioned in our intra-week reports how crucial that recovery was on Tuesday. Let us see what these technical observations are. On Tuesday, all major indices formed a ‘Bullish Hammer’ pattern on daily chart and for the Nifty it was placed at the 50 per cent retracement of the recent up move. Now we have moved one step forward as we can see the Tuesday’s ‘Hammer’ pattern along with Monday’s and Wednesday’s candle, combinedly gives a birth to a ‘Bullish Island Reversal’ pattern. This configuration occurs when the previous gap is precisely filled by yet another gap but in the opposite direction and has extremely bullish implication. Hence, going forward, as long as we do not enter into Wednesday’s gap area of 12042.10 – 12030.75, the said pattern remains intact and is likely to provide some impetus to the next leg of the rally. In the forthcoming week, once Nifty surpasses 12,160, we may see Nifty retesting of 12,220 – 12,250 levels. On the downside, 12,042 – 12,000 remains a strong support zone.
The banking index has been slightly underperforming since a few days but, on Thursday, we witnessed a sheer outperformance from this space, courtesy a smart move in the State Bank of India and Indusind Bank. Apart from this, the midcap space looked vibrant in the last couple of days and has managed to give a V-shaped recovery. Hence, we may see good traction in this universe in coming days as well.
NSE Code – KIRI INDUSTRIES
– This stock is yet to participate in the rally the broader market has seen over the past couple of months. We have already witnessed a long consolidation of nearly three months and finally, the stock prices managed to confirm a breakout in the upward direction. If we look at the overall volume activity, it has risen substantially in the recent up move. In addition, the ‘RSI-Smoothened’ on daily chart has crossed above the 70 mark, which we believe should provide the impetus for the next leg of the rally. Thus, we recommend buying this stock for a target of Rs 464 over the next days. The stop loss should be fixed at Rs 398.40.
2. NSE Code – TATA STEEL
– This stock is extremely sensitive to any development with respect to China. Recently, the stock managed to give a gigantic up move from lower levels but rising concerns over ‘coronavirus’ dented this rally and hence, the stock had to undergo a strong bout of profit booking. But now, looks like it has digested that worry and technically speaking, we can interpret this decline as a healthy retracement of the larger degree up trend. Looking at the favorable risk reward ratio, traders are advised going long for a target of Rs 468 over the next few days. The stop loss should be fixed at Rs 428.