By Shrikant Chouhan
Last week had been volatile for the traders, the benchmark Index Sensex first time hit the 50000 mark and also registered a fresh all time high of 50184.01/ Nifty 14753.55. But due to short term overbought conditions and profit booking near the psychological 50000 mark, the index failed to sustain at a higher level. Among sectors, the Nifty Auto index gained 3.42 per cent and strong buying was seen in Bajaj-Auto and Tata Motors, which rallied over 10 per cent. Whereas, Nifty Metal, PSU Banks, and Nifty Pharma indices shed over 3.5 per cent.
We are of the view that the structure of the index is volatile and likely to continue for the next couple of weeks. In the short run, Reliance Quarterly result’s outcome and the trend of global markets would be trend deciders. Technically, post strong uptrend rally, the Nifty has formed the Bar Reversal candlestick pattern which clearly indicates indecisiveness between bulls and bears. Bears are becoming stronger. The medium-term texture of the market is bullish, however, that would help the market to hold only at major support like 14300, 14100 or at 13950 levels.
Bar Reversal kind of candle and daily charts formation indicates red flag near 14750/50185 level. Hence a strong possibility of quick short term price correction if prices move to 14600 levels.
For the next few trading sessions, 14300/48400 should be the sacrosanct level for the trend following traders, if it sustain above the same then uptrend texture likely to continue up to 14600-14750/48800-49100 further upside may also possible that could life the index till 14855/49450. On the flip side, dismissal of 14300/48400 possibly open another leg of correction till 14100-13950/48100-47600.
Reliance Industries Ltd: Buy
The stock has made a strong comeback in the previous week and closed above the multi resistance area of 2040. It has also taken an exit from the bearish triangle at an upside that would lift the stock to 2150/2200 in the near term. Buy at current levels 2045, Stop Loss at 2000 and Target at 2200.:
Since the stock has broken the level of 210 it is trending upward. Currently it is consolidating between the range of 225 and 205. In the previous week we saw the stock is correcting to 209, which is the lower boundary of the consolidation and is giving better risk reward. Our advice is to buy at current levels with a final stop loss at 205. On the higher, it could bounce back to 220/225 levels.
It has formed lower high formation at 1276 as compared to earlier highest level, which was at 1317. On a daily and weekly basis, it closed below the level of 1164, which is negative for it. Our advice is to sell at resistance 1175/1180 with a final stop loss at 1210. Below the level of 1164, the stock may even fall to 1100 or 1080 levels.
(Shrikant Chouhan is Executive Vice President – Equity Technical Research at Kotak Securities. The views expressed are personal. Please consult your financial advisor before investing)
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