Nilesh Ramesh Jain
The market extended its gain for the second consecutive week where Nifty formed a big bullish candle on the weekly scale. Nifty also surpassed its previous swing high of 9,889 and ended above 10,000 levels. Now, if Nifty manages to sustain above 10,200 levels, which is the key resistance, we can expect a continuation of a current pullback towards 10,400 levels.
If we take the Fibonacci retracement of the entire recent fall from the top, then the 61.8 percent retracement which is also called the golden ratio, is coming around 10,400 levels which will now act as immediate resistance. The immediate support is now placed at 9,800 and below that index may slip towards 9,600 levels.
The momentum oscillator MACD has provided fresh buy crossover on the weekly scale and RSI has started making a higher top and higher bottom formation which hints that we can expect some moderate upmove in the coming week as well.
However, the index is not out of the woods yet and we are witnessing mere extension of a pullback rally. So one should refrain from creating an aggressive long position at the higher levels and focus on stock-specific action.
In the coming week, options data indicates that the maximum Put base is placed at 9,800 followed by 9,500 strikes. We have also seen fresh Put writing in 9,900 and 10,000 Put strikes, which are likely to act as a support zone.
The Call writers were active in 10,300 strikes, which holds the highest open interest. So continuous call writing at 10,300 hints that Nifty may find it difficult to surpass the same in the coming week. The options data indicates a broader range of 9,800 to 10,300. Based on the data, we are expecting some broader consolidation in the coming week.
The volatility index India VIX fell 5.6% to end near 28.5 levels. The cooling off in the volatility is giving comforts to the bulls and thus, we can expect some stability and pullback in the coming week.
BankNifty continued its outperformance and breached its psychological resistance zone of 21,000 levels. We have also seen a build-up of a long position throughout the week where PSU banks have started to participate. The overall structure looks positive compared to Nifty and immediate support now is placed at 19,600 levels.
Buy L&T Finance Holdings | Target: Rs 68 | Stoploss: Rs 59 | Upside: 9.6 percent
The stock has provided a breakout from a falling channel on the daily chart. It has also taken the support of its short term 21-DMA which is currently placed near Rs 57 levels. Earlier, the stock also formed a double bottom pattern near the levels of Rs 46 which can be considered as a short term bottom for the counter. The momentum indicators and oscillators are very well in the buy zone.
Buy BEML | Target: Rs 680 | Stoploss: Rs 590 | Upside: 9.6 percent
The stock has formed a morning star candlestick pattern on a weekly scale, which is considered as a bullish reversal formation. Also, the recent price action was supported by volume activity. The placement of momentum indicator and oscillator on the weekly scale hints of fresh momentum on the higher side.
Buy Siemens | Target: Rs 1,250 | Stoploss: Rs 1,100 | Upside: 8.7 percent
The stock has taken the support of its rising trend line and seems to have formed a base at around Rs 1,000 levels. The current pullback may extend further towards its previous swing high which is placed near Rs 1,250 levels. The monthly RSI has reversed from its major support zone which has been intact for the past 12 years placed at 40 levels.
The Author is Derivative analyst- Equity Research at AnandRathi.
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