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Nifty near recent highs, banking space needs to step up now

Our markets had a flat start for the week gone by as there were no major triggers on the domestic as well as global front. With some intraday volatility, Nifty managed to gradually head higher. However, last couple of sessions have been excellent as we finally witnessed some trended moves to hasten towards recent swing highs. This positivity was mainly on the back of easing off of some global concerns with respect to Sino-US trade war and long waited ‘BREXIT deal’. Eventually, Nifty managed to conclude the week on a high note by adding more than three percent to the bull’s kitty, becoming the highest weekly gains after November 02, 2018.

The last few days were lethargic in terms of index movement but if we look at it meticulously, the overall breadth has improved drastically and the way institutional buyers finally started participating, it seems to be forming some platform for the near future. Although the recent movement has not been so swift, with last two day’s strong move, we are back to recent highs. And to provide some credence to this development, the recent underperformer banking index, seems to have come out of its slumber on Thursday. On the daily chart, we can see prices finally surpassing the psychological barrier of 11600 which coincides with very important neckline of ‘Inverse Head and Shoulder’ pattern. We have been upbeat in recent declines also and now after confirming this breakout, we will not be surprised to see this rally extending towards 11,800 - 11,900 first and then a continuation beyond 12,000 also cannot be ruled out. On the flipside, 11,550 – 11,480 would now be seen as immediate support base for the index. 

We had a good broad based rally during the second half of the week and, more importantly, some of the event-sensitive stocks had shown bottoming formation. Traders can certainly keep a watch on such potential propositions, who can certainly give some extended moves. Clearly, Auto and Metal who were hammered down brutally over the past few months have finally shown stupendous moves. The only disappointing factor in last week’s rally was the relative underperformance from the banking index. Although, it showed sign of coming out of congestion zone but it is certainly lacking the kind of flamboyance it generally shows in every robust rally. Hence, if Nifty has to extend the rally towards 12,000 or beyond, the banking space needs to step up and prove its significance. 

Stock Recommendations:


View –   Bullish

Last Close –   Rs. 541.20

The paint stocks are on a roll since last three months and in fact, some of the marquee names like Asian Paints and Berger Paints have given stupendous moves. They are still not done with it, and continue with their gravity defying journey with no sign of weakness yet.  ‘KANSAINER’ is also not behind as we have been witnessing decent moves in this stock. The relative performance may be lacking with compared to larger names but now the way charts are shaped up, we expect catch up rally to unfold. Prices have finally broken above 520, which thrice acted as stiff resistance in last one year. The said breakout is supported with a good increase in volume and looking at all the above evidence we sense a strong upside in the counter in the near term. We recommend buying this stock at current levels for a target of Rs.580 over the next 14 sessions. The stop loss should be fixed at Rs.518.


View –   Bullish

Last Close –   Rs. 517.75

On the daily chart, we are witnessing a classical bullish pattern breakout known as ‘Inverse Head N Shoulder’. The said breakout is witnessed with a big bullish body candle and sizable increase in volume, providing credence to our optimistic view. In addition, we are witnessing a strong close above the higher end of Bollinger band which suggests a period of strong trending up move after its recent consolidation. Hence, we recommend buying this stock at current levels for a target of Rs.593 over the next 14 sessions. The stop loss should be fixed at Rs.477.

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