If the index sustains below 10,850 then the pressure would increase on the downside and we may see Nifty testing its 200-DMA which is placed near 10,770.
The mayhem across the NBFC space put tremendous pressure on the Nifty index and we have seen massive sell-off in the past few trading sessions.
In that pessimism, the Nifty hit a low of 10,866.45 on September 21. Subsequently, we saw a decent pullback in the early part of the week. However, such pullbacks got sold into and Nifty broke the support level of 10,866.45 intraday in Friday’s trading session.
Looking at the daily chart, the RSI (14) broke the support level of 40, which does not augur well for bulls. Also, the 9-45 EMA on the daily chart is negative, hence, sell on the rise will be a prudent strategy on the index.
At this juncture, Friday’s low of 10,850, which coincided with the 50% retracement of its entire swing move from the bottom of 9,951.90 to 11,760.20, will act as a strong support.
Also, the previous daily swing high which was earlier acting as a strong resistance had reversed its role and is now likely to act as a strong support.
If the index sustains below 10,850 then the pressure would increase on the downside and we may see Nifty testing its 200-DMA which is placed near 10,770.
On the other hand, the 11,150 – 11,170 levels are strong resistance zone and only a decisive move beyond this level will attract fresh buying interest.
For this week, we expect broader indices may see a minor pullback and Nifty may see up move towards 11100-11150 levels. However, overall undertone remains bearish and any kind of short covering move can be utilized to exit from trading long positions and initiating fresh shorts.
Here is a list of top three stocks which could give 6-14% return in the next one month:
ITC: Buy| LTP: Rs 296.70| Buy around 295| Target: Rs 315| Stop Loss: Rs 287| Return 6%
On the daily chart, the stock has precisely tested the daily 89-EMA on Thursday and formed a bullish ‘Hammer’ pattern on daily chart. The said pattern got activated on Friday and we saw support based buying interest coming in the stock.
The daily RSI (14) precisely found support near 40 levels and started heading northward. The higher top higher bottom formation on the weekly chart is intact which indicates that the current trend is still on the upside.
Hence, we recommend traders to buy this stock around Rs 295 with a price target of Rs 315. A stop loss should be placed below Rs 287.
Titan Company : Sell| LTP: Rs 805.50| Sell around Rs 820 – 825| Target: Rs 740| Stop Loss Rs 861| Return 8%
After confirming its breakdown from the bearish ‘Head & Shoulder’ pattern on the weekly chart, the stock has seen a pullback which led to a retest of the neckline of the said pattern.
Once again, the selling pressure seen at higher levels and the stock resumed its downtrend last week. On the daily chart, we are seeing the formation of a negative reversal pattern which indicates that the overall trend is still down.
The weekly ‘Lower Top Lower Bottom’ formation is still intact. Hence, we advocate traders to go short in Titan in a range of Rs 820 to 825 with a price target of Rs 740. A stop loss should be placed above Rs 861.
V-Guard: Sell| LTP: Rs 176.35| Sell around Rs 180 – 182| Target: Rs 150| Stop Loss: Rs 194| Return 14%
Looking at the weekly chart, the stock has formed a Bearish Head & Shoulder pattern and off late, the stock confirmed its breakdown from the said pattern. The weekly RSI (14) convincingly closed below the 40 mark which supports our hypothesis.
Also, on the weekly scale, we are seeing a formation of Lower Top Lower Bottom formation. Hence, we expect this stock to correct further from the current level and therefore traders are advice to build a short position in a range of Rs 180 to 182 with a price target of Rs 150. A stop loss should be placed at Rs 194.
Disclaimer: The author is Head of Technical Research, Way2Wealth Brokers Pvt. Ltd. The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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