Selling pressure at higher levels after the sharp rally indicate a pause in the momentum, which is healthy for a further upside, technical experts said.
Sunil Shankar Matkar
August 23, 2021 / 09:53 AM IST
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Last week, the benchmark indices touched historic highs, with the Nifty 50 hitting 16,700 and the S&P BSE Sensex surpassing 56,000. However, they retreated from those levels amid global weaknesses and increasing Covid-19 cases worldwide, with the Sensex closing 0.2 percent lower and the Nifty 50 losing 0.5 percent in the week ended August 20.
There was profit-booking in the last two sessions of the truncated week, especially after a strong run-up since the beginning of August. The Sensex gained 6.1 percent and the Nifty 50 rallied 5.4 percent from August 1 to 17.
Selling pressure at higher levels after the sharp rally clearly indicated a pause in the momentum, which experts said is healthy for a further upside. They advised investors to keep positions light and wait for a clear direction.
“Looking at the weekly close of the benchmark, one would say not much damage in spite of a lot of uncertainty across the globe,” said Sameet Chavan, chief analyst – technical and derivatives, at Angel Broking. “But if we meticulously observe the individual stocks outside IT and FMCG spaces, the brutal knocks are clearly visible. The weekly chart of the Nifty exhibits a ‘shooting star’ candle, which is an indication of some pause if the low of the candle is breached on a closing basis.”
He said that for the coming week, a cluster of support levels at 16,350-16,250-16,150 should be observed closely.
“As of now, there is no indication of the Nifty sliding below the lower range of this support zone, but you never know how global developments pan out,” Chavan said.
Real strength in the Nifty is possible only after the band of 16,500-16,600 is convincingly surpassed, he said.
“Also, the Bank Nifty and the Nifty Midcap50 Index are trading at make-or-break levels. Since the coming week is monthly expiry week, it would be interesting to see how things unfold,” he said.
The expiry date for index and stock derivative contracts is on the last Thursday of every month.
Chavan’s advice is to remain light for a while and ideally look at individual stocks rather than a benchmark index.
Here is a list of 10 trading ideas by experts for the next 3-4 weeks. Returns are based on the August 20 closing prices:
Expert: Rohit Singre, Senior Technical Analyst at LKP securities
Britannia Industries: Buy | CMP: Rs 3,895.95 | Stop Loss: Below Rs 3,600 | Target: Rs 4,200-4,400 | Return: 7.8-12.9 percent
The stock has made a fresh breakout on the weekly technical chart. Descent volume activity has been witnessed at the time of the breakout, which shows its strength. The moving average convergence/divergence (MACD), a momentum indicator, also ranges above its base line with a fresh crossover, showing a positive momentum.
Lux Industries: Buy | CMP: Rs 4,144.75 | Stop Loss: Below Rs 3,900 | Target: Rs 4,350-4,450 | Return: 5.0-7.4 percent
The stock retested its previous breakout zone and showed a strong positive move with a big bullish candle on the daily chart. The price is above the Ichimoku Cloud, which suggest that the overall trend is up. Good volumes are seen on the retest candle, which is an added confirmation.
(The Ichimoku Cloud is a collection of technical indicators that show support and resistance levels, as well as momentum and trend direction.)
Tata Power: Buy | CMP: Rs 126.20 | Stop Loss: Below Rs 120 | Target: Rs 135 | Return: 7 percent
The stock has previously given a range breakout and recently prices again reached the previous breakout zone. The stock price is near a multiple support zone of a rising trend line and a horizontal line support. It is also well above the Ichimoku Cloud, which indicates a good trend.
Power Finance Corporation: Buy | CMP: Rs 124.40 | Stop Loss: Below Rs 122 | Target: Rs 130-135 | Return: 4.5-8.5 percent
The stock has previously formed a ‘symmetrical triangle breakout’ with good volumes and is now trading near a rising trend line. If the price holds above the rising trend line, then one can expect a good bounce. Symmetrical triangles are bullish continuation patterns so one can expect a good move if the Rs 122 level is saved.
Tata Elxsi: Buy | CMP: Rs 4,732.60 | Stop Loss: Below Rs 4,400 | Target: Rs 5,100-5,300 | Return: 7.8-12.0 percent
The stock has given a fresh breakout on the daily chart, which suggests that any dip near the breakout zone will be a good buying opportunity. Strong volumes accompanies the breakout. Both momentum indicators – the relative strength index (RSI) and the MACD are ranging in positive territory.
Expert: Rajesh Palviya, VP – Technical and Derivative Research at Axis Securities
Asian Paints: Buy | CMP: Rs 3,112.95 | Stop Loss: Rs 3,000 | Target: Rs 3,230-3,260 | Return: 3.8-4.7 percent
At the current close, the stock has decisively cleared a three-week, multiple resistance zone of Rs 3,060 on a closing basis, indicating a strong breakout. This breakout is accompanied with huge volumes, which means increased participation. Buying was observed from its 20- and 50-day SMA support zone (Rs 3,005-3,010), which remains a crucial support zone. The daily and weekly RSI is in a bullish mode, signalling strength in the near term.
Fortis Healthcare: Buy | CMP: Rs 277.60 | Stop Loss: Rs 261 | Target: Rs 295-308 | Return: 6.3-11.0 percent
On the daily and weekly charts, the stock has decisively broken out of its multiple resistance zone of Rs 260 on a closing basis. Huge volumes were observed on this breakout, which suggests a strong momentum. On the daily chart, the stock is well-placed above its 20-, 50- and 100-day SMA, reconfirming the upside momentum. The daily and weekly RSI is in a bullish mode, which signals strength in the near term.
Expert: Sameet Chavan, Chief Technical & Derivatives Analyst at Angel Broking
Bata India: Buy | CMP: Rs 1,742.60 | Stop Loss: Rs 1,675 | Target: Rs 1,845 | Return: 5.9 percent
This stock has been a steady mover in the past couple of weeks, while the broader market was under tremendous stress. There was a breakout from recent hurdles and volumes have been quite decent to support the price action.
Importantly, the weekly positioning of the stock is quite impressive and it won’t be surprising to see some outperformance if there is a bounce-back in individual pockets in the coming week. We recommend buying on a small decline for a short-term target of Rs 1,845. The stop-loss can be placed at Rs 1,675.
United Spirits: Buy | CMP: Rs 703.90 | Stop Loss: Rs 682 | Target: Rs 764 | Return: 8.5 percent
The liquor space was quiet for the past couple of months, but all of a sudden there were some vibrant moves in this basket on Wednesday. United Spirits was consolidating around its support level and suddenly took off to confirm its highest level in 18 months. The massive bullish candle was accompanied by gargantuan volumes, indicating genuine buying interest. Although there was some mild profit-booking the following day, we recommend buying for a short-term price target of Rs 764. The stop-loss needs to be maintained at Rs 682.
Expert: Ashis Biswas, Head of Technical Research at CapitalVia Global Research
Linde India: Buy | CMP: Rs 1,953.90 | Target: Rs 2,480 | Upside: 26.9 percent
With the weekly closing price above Rs 1,890, the stock is expected to head to Rs 2,480 in the short term. Once it crosses and closes above the Rs 2,320 level, it can be expected to touch Rs 2,900 in the mid-term.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
