Since the weekly chart of midcap index is showing a bearish formation, which can be termed as ‘Engulfing’ candle, we advise traders not to create aggressive longs in high beta counters, said Sameet Chavan of Angel One.
Sameet Chavan
October 25, 2021 / 07:29 AM IST
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Last week started with a decent bump up which was then followed by yet another gap-up on October 19 to reach new millstone of 18,600. However, the high beta midcap counters (recent movers) started falling fiercely, which dampened the overall sentiment in the market. Nifty had a rub off effect of this and in the process, it came off slightly in the following couple of sessions as well.
On October 21 morning, the global markets were a bit stable and as a result, our market opened with a decent upside gap, exceeded the SGX Nifty by a fair margin. However, it was merely a formality as we not only saw Nifty erasing all gains but also went on to slide below 18,100 during the penultimate hour. Fortunately due to the late recovery in some of the heavyweights, Nifty managed to recover fair bit of ground to conclude the weekly expiry tad below the 18,200 mark.
A similar price action was seen on October 22, too, and with a gradual decline, Nifty ended around 18,100.
Most Nifty constituents, except the financial stocks, are weak and are leading the correction in the index. However, the banking stocks seem to have different plans. They refused to correct in the first half of the week and in fact, when Nifty was about to knock the crucial support of 18,000 in the latter half, the banking counters came to rescue. There was complete gush seen in the banking space on Thursday, which led Bank Nifty to close above the new millstone of 40,000 with some authority.
If banks had not shown this mesmerising move towards the end of the week, the Nifty would have certainly breached the 18,000 mark on the downside. Now, two major indices are showing complete divergence, so going forward, it would be interesting to see whether the Bank Nifty’s strength lifts Nifty higher or vice versa. Hence, all eyes are on the banking space because a follow up move from hereon will certainly lift the overall sentiment in the market.
As far as levels are concerned, 18,060 – 18,000 are to be considered as crucial supports for Nifty, whereas 18,260 – 18,400 would be seen as immediate hurdles.
Since the weekly chart of midcap index is showing a bearish formation, which can be termed as ‘Engulfing’ candle, we advise traders not to create aggressive longs in high beta counters. Yes, the thematic approach can still be followed, but one needs to be very selective now.
Below 18,000 for Nifty, the near-term uptrend gets negated and then we are up for some correction which is overdue since a long time.
Here are two sell calls for next 3-4 weeks:
Titan Company: Sell | LTP: Rs 2,412 | Stop Loss: Rs 2,480 | Target: Rs 2,300 | Return: 4.6 percent
This has been one of the rank outperformers over the past couple of decades and in fact, since the March 2020 fiasco, we have seen multi-fold returns in this stock.
Last week, we finally witnessed some decent correction from its new record highs. Due to this, we could see large bearish candle getting formed on the weekly time frame chart for the first time in last 18 odd months. Technically, we can term it as a ‘Dark Cloud Cover’ pattern which indicates short term correction in the counter.
We recommend selling for a short term target of Rs 2,300. The stop loss can be placed at Rs 2,480.
United Breweries: Sell | LTP: Rs 1,630.40 | Stop Loss: Rs 1,690 | Target: Rs 1,530 | Return: 6.2 percent
All liquor stocks have done phenomenally well over the past few months and this stock was amongst the first movers last year. Last week lots of midcap stocks have undergone a decent price correction and this is clearly one of them. Although the decline was not as brutal as some of the others, the gradual downward activity throughout the week led to nearly 5 percent correction on a weekly basis.
Taking a glance at the daily chart, we can see prices precisely vacillating within the boundaries of an ‘Upward Sloping Channel’ of late and on Friday, we could see prices closing around the lower end.
Considering the profit booking mode, we expect the breakdown to happen and hence one can look to short this stock for a near term target of Rs 1,530. The stop loss can be placed at Rs 1,690.
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