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Nifty outlook: Technical indicators suggest turbulence ahead; stay cautious

Last Monday, the global screen was looking extremely terrible and, thus, domestic markets too started the week around 17,450 mark. Surprisingly, after the initial hiccup, we witnessed a v-shaped recovery, not only to erase losses but also to trade in the green, above 17,600. However, it could not decouple itself from the global peers for a long time as the markets took a U-turn post the mid-session, to finally sneak below 17,400 on a closing basis.

The following session, initially, traded weak but thereafter the global markets stabilized so did ours. After entering a key support zone of 17,350 – 17,250, the Nifty reversed in the upward direction and then kept thrashing all intermediate hurdles one after another. In fact, due to decent rally in the latter half of the week, Nifty went on to register a new high convincingly above the 17,900 mark.

Our markets had a remarkable comeback in the last four sessions as we not only managed to recover from lows but also went on to clock fresh highs. We have clearly outperformed the global peers as, despite a relief move on Thursday and Friday, they are still trading well below their highs. Honestly speaking, the recovery beyond 17,600 has certainly surprised us but eventually market is superior.

Ideally, after market surpassing previous highs, our cautious stance should have been negated; but there are a few time-wise projections as well as negative divergence in ‘RSI-Smoothened’ oscillator, clearly holding us back. Hence, we would keep reassessing the situation closely for the next few days. As far as levels are concerned, every 100 points psychological level from here would be seen as immediate resistance i.e. 17,900 – 18,000. On the flipside, 17,700 – 17,650 are to be seen as key supports.

We advise traders to continue with a stock specific approach but keep booking timely profits as well and also avoid carrying aggressive overnight bets. Meanwhile all eyes on global markets and on how banking index move ahead from here on which could probably decide the next path of action for markets.

Stock recommendations:

View – Bullish
Last Close – Rs 897.85

This stock has been consolidating since last 5 – 6 months with no real momentum in the counter. However on September 24, the stock price suddenly took off after surpassing its sturdy wall of 890. This move was accompanied with sizable volumes, providing credence to the move. Price-wise, the daily chart now exhibits a ‘Bullish Cup and Handle’ pattern and hence, we expect a decent move in this stock in the forthcoming week. We recommend buying on a small decline towards 890 – 880 for a short term target of Rs.960. The stop loss can be placed at Rs.853. 

View – Bullish
Last Close – Rs 136.10

This one of the ‘Maharatna’ companies has failed to live up to its expectations for last seven years now. In fact, in the ongoing Bull Run as well, this stock did not participate much. But now, with ‘Crude Oil’ prices trading at their 3-year high, this stock has started to show some strength. With this week’s uptick, stock prices have finally managed to surpass the key moving average of ‘200-SMA’ on the weekly time frame chart for the first time since May 2019. In addition, the ‘ADX (14) indicator has also started displaying upward trajectory. Hence, one can look to buy this stock for near term target of Rs.149. The stop loss can be placed at Rs.129.80. 

View – Bearish
Last Close – Rs 4,116.95

We have seen a spectacular move in this stock over the past few months and there has been no stopping at all. The stock prices literally flew over 4000 to clock fresh highs; but since last couple of weeks, we are seeing some fatigue at higher levels. Despite making several attempts, it is unable to stay beyond the 4200 mark. On Friday, we witnessed a small drop in prices post the mid-session. Since it failed on slightly higher volumes, we expect the weakness to continue in the forthcoming week. Hence, traders are advised to short with strict stop loss above Rs.4240 for a target of Rs.3950. 


Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives, Angel Broking. Views expressed are personal.

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