#39;Sustained move above 11,520 on Nifty can trigger short covering rally to 11,800#39;
Relentless selling continued on D-Street for the second day in a row as Nifty shut shop deep in the red falling 460 points of in two trading sessions.
Further, it closed inside the gap area for the first time following the exit poll results on May 20, indicating that the bears are in control at the moment. However, it did manage to take support at the 127 percent Fibonacci extension level of the BC leg within the bullish AB=CD pattern, which is placed at 11,520.
A sustained trade above this support can trigger short covering rally to 11,625-11,800. On the flip side, a trade below 11,520 will extend the corrections to 11,400-11,380, which is the gap support area and
161.8 percent Fibonacci extension level of the BC leg.
Moreover, RSI has also reached extreme oversold territory on shorter time frame following two days of massive fall suggesting a short covering rally may be in the offing.
Here are three trading ideas:
On the daily chart, Apollo Tyres has broken down from a bearish wedge
pattern support line placed at Rs 190 triggering a resumption of the downtrend. Further, a sustained trade below Rs 187 supported by high volumes will extend the correction in the stock to Rs 176-170.
Moreover, on the weekly chart, it continues to form lower highs and lower lows confirming a dominant bear trend in the stock.
RSI has also turned southward after facing resistance at the 50-level forming lower highs on the weekly time frame confirming a bearish trend in the stock.
The stock may be sold in the range of Rs 189-187 for targets of Rs 176-170, keeping a stop loss above Rs 195.
On the daily chart, SRF is on the verge of a breakdown from a channel support line placed at Rs 2,870. A sustained trade below this support line will trigger sharp corrections in the coming trading sessions dragging it Rs 2,690-2,600.
Further, on the weekly chart, it has formed a huge black body in trade after forming a Bearish Engulfing candlestick pattern in the previous week confirming a weakening uptrend.
RSI has also turned lower after taking testing the previous resistance zone of 80 suggesting lower levels in the coming trading sessions.
The stock may be sold in the range of Rs 2,890-2,870 for targets of 2,690-2,600, keeping a stop loss below Rs 2,985.
On the daily chart, Jubilant Foodworks is on the verge of a breakout from a
channel resistance placed at Rs 1,260. A sustained trade beyond this resistance will take the stock higher to Rs 1,320-1,370.
Moreover, on a weekly time frame, it has turned upwards after forming a positive divergence affirming a dominant bullishness in the stock.
Further, RSI is also suggesting higher levels in the coming trading sessions as it has turned upwards from the 40 level.
The stock may be bought in the range of Rs 1,240-1,250 for targets of Rs 1,320-1,370, keeping a stop loss above Rs 1,200.
The author is Senior Manager, Technical Analysis at YES Securities
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