Nilesh Jain
The Indian equity market extended its losing streak for the second consecutive week.
Nifty has formed an island reversal formation on the daily chart post completing its 50 percent retracement of the entire fall, which is hinting that the index has formed short term top near 9,900 levels.
Nifty had earlier negated the formation of a higher top and higher bottom pattern and now it has started making a lower top and lower bottom on the daily chart.
The immediate resistance of the previous top is now placed near 9,600 levels. So, as long as Nifty trades below these levels, every bounce should be utilized as a selling opportunity.
On the daily chart, Nifty has also formed head and shoulder patterns where the neckline is placed near 9,050 levels.
If the index breaks below the said level decisively, then we can expect further downside towards 8,500.
MACD oscillator has provided fresh sell crossover on the daily chart. The momentum indicator RSI has also slipped below 50 levels and shows that Nifty is losing its strength and we may see further selling pressure going forward.
The volatility index India VIX remained unchanged near 38 levels. Due to recovery from the lower levels, it has formed a dragonfly Doji candlestick pattern on the weekly scale which is a bullish reversal candle.
So, we may expect a spike in the volatility index in the coming week, which will create some pressure on the index.
The options data indicates that the 9,000 strike, which has the maximum open interest, is providing support.
The Call writers were active in the majority of the out-of-the-money strikes where the maximum open interest is placed at 9,500 strikes. The options data indicates a broader range of 9,000 to 9,500.
Bank Nifty continued its underperformance and breached its psychological support at 19,000 levels. Now, as long as it trades below these levels, we can expect further selling pressure towards 18,000 levels which is the next immediate support.
Here are the three trading ideas for the next 3-4 weeks:
MCX | Buy | LTP: Rs 1,149 | Target price: Rs 1,240 | Stop loss: Rs 1,090 | Upside: 8%
The stock has seen the breakout from a symmetrical triangle pattern on the daily chart. The volume activity was also higher than the average. The stock is also trading above its long term 200-DMA which is placed at Rs 1,090 which is acting as a major support zone.
Marico | Buy | LTP: Rs 316.70 | Target price: Rs 350 | Stop loss: Rs 298 | Upside: 11%
The stock has seen breakout from a cup and handle pattern on the daily chart. It has formed a big bullish candle on the weekly scale which hints at positive momentum in the coming sessions. The momentum indicator and oscillator are very well in buy mode on daily as well as weekly scales.
The stock has seen a breakdown from a symmetrical triangle formation on the daily chart. It is also facing stiff resistance of 21-DMA which is placed at Rs 695. The volume was higher than average which is also supporting the price action. The momentum oscillator MACD has provided fresh sell crossover on the daily chart.
(The author is Derivative and Technical analyst at Anand Rathi)
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