Going ahead, since the market is a bit oversold, we may see some relief move in between, but traders should not get carried away by such rebounds, said Sameet Chavan of Angel One
Sameet Chavan
November 01, 2021 / 07:59 AM IST
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The global set up was just ideal for our markets to have a head-start on October 25 and in fact we surpassed what SGX Nifty was indicating as well. However, market did not sustain at higher levels and had a slight weak close. This was followed by some recovery in the next two sessions, but overall, the momentum was clearly lacking. The expiry session of the October series turned out to be a nightmare for the bulls as we witnessed a massive sell-off across the board throughout the session to break all important levels one after another.
Nifty eventually plunged below 17,900 to conclude the October expiry on a depressive note. In this process, Nifty ended with nearly 2 percent loss, thereby marking a biggest single day cut after April 12, 2021. The bears were not done with this as we witnessed a follow through selling of this to test the 17,600-mark.
Due to this week’s correction, the bears have finally managed to apply brakes on the ongoing euphoria. We saw weakest weekly performance after nearly 8 months as Nifty shed more than 2 percent to conclude the October month convincingly below 17,700. Since last week or so, Nifty started to look a bit nervous but banking was providing a strong helping hand and hence, we did not see any major damage in benchmark. But then, the financial space also succumbed to the broader market weakness – tumbling over 3 percent. This imposed tremendous pressure on Nifty and in the process, Nifty had to finally surrender the sheet anchor support of 18,000.
In fact, due to aggrandized selling, it just hastened towards the next key support of 17,600. Since last few days, we have been maintaining our cautious stance on the market and even though market was making new highs, we maintained our skepticism and repeatedly advised booking profits. When market was not correcting, this might have sounded senseless, but historically it’s proven, when things look hunky-dory all around, the euphoric situation takes place and that is the time when market strikes back. This is exactly what we witnessed in last couple of weeks.
Technically speaking, due to this late dominance from bears, we can observe few important developments on charts. Firstly, the ‘Lower Top Lower Bottom’ on daily chart after breaking below 18,000, which coincided with the violation of the key short-term moving average of ’20-day EMA’ (exponential moving average). More importantly, if we take a glance at the monthly chart, we can see a formation of ‘Shooting Star’ pattern, which certainly does not bode well for the bulls.
Going ahead, since the market is a bit oversold, we may see some relief move in between, but traders should not get carried away by such rebounds. On the higher side, 18,000–18,100 would now be seen as immediate hurdles and any bounce back towards it, should be used to lighten up longs. On the flipside, we may see this corrective move extending towards 17,450 first and if things worsened then the possibility of sliding towards 17,200 – 17,000 cannot be ruled out. We reiterate on staying light and avoiding any kind of bottom fishing for a while.
Here is one buy call and one sell call for next 2-3 weeks:
Vimta Labs: Buy | LTP: Rs 349.75 | Stop Loss: Rs 298 | Target: Rs 385 | Return: 10.1 percent
This has been a steady performer over the past year and a half. Recently, lot of stocks especially from the broader market, underwent a decent price correction. This stock seems to be in a complete denial mode as it not only refused to correct but also managed to clock fresh record high this week, which is a sign of inherent strength.
Technically speaking, we can see stock traversing the ‘Neckline’ level of Rs 340 with substantial rise in volumes. In addition, the stock prices remained quiet when we witnessed a strong correction in market in last couple of sessions.
We expect this outperformance to continue and despite having a cautious stance on the market, we recommend buying on a decline around Rs 335 – 325 for a short term target of Rs 385. The stop loss can be placed at Rs 298.
Reliance Industries: Sell | LTP: Rs 2,536.25 | Stop Loss: Rs 2,600 | Target: Rs 2,450 | Return: (3.4) percent
Mostly we do not associate this stock with the term ‘Weakness’. Undoubtedly the higher degree trend still remains strongly bullish and purely with a near term, we can see some signs of profit booking.
Overall, the price formation is quite similar to Nifty as we can see a ‘Lower Top Lower Bottom’ formation on daily chart along with prices sliding below the key moving averages.
In addition, the monthly candle resembles a ‘Shooting Star’ pattern, which again does not augur well. Since it has already corrected a bit, we advise traders to short on a bounce for a near term target of Rs 2,450. The stop loss can be placed at Rs 2,600.
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