Santosh Meena, Head of Research at Swastika Investmart
The Nifty is consolidating in the demand zone of 16,200-16,000 with negative bias followed by a sharp cut last week. The market is oversold and trading near an important demand zone but there is no confidence among buyers.
On an immediate basis, the Nifty is facing resistance in the 16,400-16,500 area; above this, we can expect a short-covering rally towards the 16,700 level then 16,900-17,000 is the next supply zone.
On the downside, if it slips below 16,000 level, then we can expect a move towards the previous swing low of 15,700 level then 15,500-15,000 are the next important support levels.
Nifty Bank is trying to hold 34,000 level and if it manages to cross 35,000 level, then we can expect a short covering move towards 36,000-36,500 levels, while if it slips below 34,000 level, then we can expect a fall towards 33,000-32,000 levels.
If we look at the derivative data then long exposure in the index future of FIIs has dipped to a multi-month low of 22 percent, which is extremely oversold whereas the Put-Call ratio of 0.79 also indicates an oversold territory. Therefore, the Nifty is trying to find support in 16,200-16,000 zone and we can expect a bounce back from here.
There is a cool-off in commodity prices which could be a supportive factor for the Indian market, however, there is a need for some pullback in the global markets for bulls to gain some confidence.
Crude oil prices, rupee movement, and FIIs' behaviour will be other important factors for the direction of the market while the last batch of earnings may continue to lead to stock-specific volatility.
It is difficult to find buying ideas in such a weak market therefore traders should trade with proper risk management where following are some stocks that are showing relative strength in the market.
Here are three buy calls for next 2-3 weeks:
ABB India: Buy | LTP: Rs 2,230.55 | Stop-Loss: Rs 2,050 | Target: Rs 2,500 | Return: 12 percent
The counter has created a strong base at its 200-DMA (day moving average) and witnessed a breakout of a triple bottom formation. It witnessed pullback in the previous trading session and then took support at the support level of Rs 2,100 with a bullish Hammer candlestick formation.
It is trading above its all-important moving averages with a positive bias in the momentum indicators.
Minda Industries: Buy | LTP: Rs 892.6 | Stop-Loss: Rs 800 | Target: Rs 1,020 | Return: 14 percent
The counter is witnessing signs of bullish reversal after a meaningful correction. It witnessed a sharp bounce back from Rs 800 support level and managed to close near its 200-DMA.
Rs 940 is an immediate resistance; above this, we can expect a rally towards 100-DMA of Rs 1,020. Momentum indicator RSI (relative strength index) witnessed a positive crossover from oversold territory.
Varun Beverages: Buy | LTP: Rs 1,082 | Stop-Loss: Rs 1,000 | Target: Rs 1,200 | Return: 11 percent
The counter is in strong bullish momentum where it is consolidating above its 20-DMA amid weakness in the overall market. It is likely to break out on the upside to resume its uptrend.
On the downside, the previous breakout level of Rs 1,015 will act as strong support at any pullback. Momentum indicators are positively poised to support the current strength of the counter.
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