By Nagaraj Shetti
Nifty continued to show weakness on Wednesday amidst range movement and closed the day lower by 91 points. A long negative candle was formed on the daily chart, that has overlapped the previous negative candle. Technically, this market action signal continuation of downside momentum and a lack of strength to sustain the highs.
After the upside breakout of crucial resistance of down sloping trend line at 16100 levels on July 8, the market has failed to sustain the gains and slipped into weakness since then. The current pattern suggests a false upside breakout of the trend line resistance. On the other side, smaller degree of higher tops and bottoms is intact and the present weakness seems to be in line with the new higher bottom formation. But, there is no confirmation of any higher bottom reversal pattern as of now.
The short-term trend of the market continues to be weak. Nifty is currently placed at the key lower support of 16000 levels. A decisive move below this support could drag Nifty down to the next support of 15700 levels. A sustainable upside could resume above 16150 levels.
Buy ASTRAL LTD
Target: Rs 1,950
After showing a range-bound movement in the last few weeks, the stock price (ASTRAL) has shifted into a sustainable upside bounce so far this week. The stock price has moved above the hurdle of Rs 1745 as per the concept of change in polarity. This action could be considered as an upside breakout of the hurdle as well as the range. Volume has started to rise during upside breakout and RSI shows positive indication.
Buying can be initiated in ASTRAL at CMP (1775), add more on dips down to Rs 1710, wait for the upside target of Rs 1950 in the next 3-4 weeks. Place a stoploss of Rs 1655.
Sell TECH MAHINDRA JULY FUTURE
Minor upside bounce of the last three weeks seems to have completed in this IT stock (TECHM), as the stock price has witnessed downward correction from the highs. We observe a negative chart pattern like lower tops and bottoms on the weekly chart and this week’s swing high of Rs 1034 could now be considered as a new lower top of the sequence. From here, one may expect further weakness in the stock price towards the formation of lower bottom of the sequence. Weekly 14 period RSI shows negative indication.
One may look to sell TECHM JULY FUTURE at CMP (Rs 965.50), add more on rise up to Rs 995 and wait for the downside target of Rs 890 in the next 2-3 weeks. Place a stoploss of Rs 1030.
(Nagaraj Shetti is a Technical Research Analyst at HDFC securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)