Nifty short-term trend still negative, may bounce back from 15500; check top trade ideas

By Nagaraj Shetti

After showing consolidation movement on Tuesday, Nifty continued with choppy movement on Wednesday and closed the day lower by 39 points. After opening on a positive note, the market has shifted into a narrow range movement for the entire session. The attempt of upside bounce from the lows has failed to sustain and the market showed minor weakness from the highs towards the end. 

A small negative candle was formed on the daily chart with minor upper shadow. Technically, this pattern indicates a lacklustre type of movement in the market. Though Nifty placed at the crucial support of 15600-15700 levels (previous swing lows), the market is struggling to show any meaningful upside bounce from the support. The current chart pattern indicates the possibility of one more leg of downside before showing a sharp upside bounce. Nifty as per long-term charts like monthly has placed at the crucial lower support of 20m EMA and previous swing lows around 15600-15700 levels and the opening downside gap on the weekly chart is expected to be filled soon, as per its pattern like filling the gaps immediately after the opening in the past.

The short-term trend of the Nifty continues to be weak with range-bound action. Such lack of strength to move up at important support signals chances of a false downside breakout or one leg of downside before showing a sharp upside bounce from the lows of around 15500 levels in the near term. Immediate resistance is placed at 15780.

Stock Picks: 

Buy Strides Pharma Science Ltd (STAR)-(CMP Rs 326.15) 

The stock price was in a sharp downward trend over the last many months, as it slide down with negative sequence like lower tops and bottoms according to the weekly timeframe chart. The last swing low of Rs 263 of mid part of May 22 signals a possible bottom reversal pattern for the stock price. The current weakness seems to have reversed in this week at Rs 294 levels and that resulted in a sustainable upside bounce so far. This formation of higher bottom indicates a positive outlook. Rise in volume during up-move and positive RSI pattern signal more upside ahead.

Buying can be initiated in STAR at CMP (326.15), add more on dips down to Rs 316, and wait for the upside target of Rs 360 in the next 3-4 weeks. Place a stoploss of Rs 305.

Sell LAURUSLABS JUNE FUTURE- (CMP Rs 513) 

The stock price (Laurus Labs Ltd) as per the weekly chart was in a downtrend over the last one month. The weakness seems to have strengthened recently and the stock price is now making an attempt of downside breakout of the crucial trend line support at Rs 525 levels (ascending multi-month trend line connected from the bottom of Nov 20). Volume has started to rise during the downside breakout in the stock price and the weekly 14-period RSI is placed to slide below key lower 40 levels. Hence, further weakness from here could open a sharp downtrend for the stock price ahead. 

One may look to sell LAURUSLABS JUNE FUT at CMP (Rs 513), add more on rise up to Rs 525 and wait for the downside target of Rs 465 in the next 2-3 weeks. Place a stoploss of Rs 540.

(Nagaraj Shetti is a Technical Research Analyst at HDFC securities. The views expressed are the author’s own. Please consult your financial advisor before investing.)