Nifty: Nifty seen consolidating, go easy on longs: Analysts

Traders must be cautious while being aggressively bullish on the market this week after the recent swings, said technical analysts. NTPC, Tata Power, TCS, Infosys, Dr Reddy’s, Maruti, Siemens, AB Capital, Exide, Coal India, and BSE could continue to witness strong buying interest, according to technical analysts.


Where is the Nifty headed this week?
Chart patterns suggest the 10-20 day exponential moving average (EMA) zone of 21,580-21,630 will act as a strong support going forward. Until spot Nifty holds 21,580, we may witness the continuation of the current momentum up to levels of 22,100-22,150. However, if the index slips below 21,600, profit booking up to 21,350- 21,300 could be witnessed. Weekly options data coupled with cooling off in India VIX suggests possible consolidation for Nifty within the 21,550-22,100 range for the upcoming week.

What should investors do?
We expect IT, power, CPSE, oil & gas, and auto to outperform, while Bank Nifty could continue its underperformance against Nifty and other sectoral indices. With the dollar index witnessing an uptick up to 103.90 levels, traders must exercise caution on over-leveraged long positions in metal stocks as there could be pressure witnessed at higher levels given the negative correlation between the dollar index and commodities. Positive trade set-up is visible in select large-cap names such as NTPC, Tata Power, TCS, Infosys, Maruti and Siemens. On the mid-cap front, stocks like AB Capital, Exide, Coal India, BSE, Engineers India, IndiGo, MCX and NRB Bearings could continue to witness strong buying interest.

TECHNICAL ANALYST, ANGEL ONEWhere is the Nifty headed this week?
Friday’s candle shows a formation that resembles a ‘Shooting Star’ pattern at a new all-time high. This has a negative implication once prices start trading below the low of the candle, i.e. 21,805, and certainly casts doubt on bullish prospects. Although prices seem range-bound, caution is advised for traders due to a complete nosedive in financial space, which proves to be a spoilsport once again. Traders are advised to avoid complacent long bets, and ideally, any bounce towards 22,000- 22,100 should be considered to exit long positions. The primary up-trend will resume only once Nifty closes above 22,100 comfortably. Conversely, immediate support is identified at 21,650, followed by 21,430, with a breach potentially triggering further weakness in the near term. What should investors do?
With Friday’s strong upsurge above Rs 370, Latent View is about to break out from the congestion zone. We recommend buying for a target of Rs 528 with a strict stop loss of Rs 459.80. Jubilant FoodWorks has not only breached key price swings but is below the key moving averages like 89- day EMA and 200-day SMA. In addition, the ‘RSI-Smoothened’ oscillator has dipped below the 15 mark, indicating significant underperformance of the prices. It can be sold for a target of Rs 474 with a stop loss of Rs 512.


Where is the Nifty headed this week?
Based on the derivatives data we don’t expect any major crack in the markets. If there is a bigger cut, then the markets might not sustain at lower levels. On the technical front, Nifty registered a new high of 22,126, and that makes it a double top. Thus, a close above 22,126 in February might result in a new round of rally for the markets. Investors and traders can go for aggressive bets only above the same. Meanwhile, on the downside, 21,500 can be a zone for some staggered buying in the coming week.

What should investors do?
Traders are advised to stay light from here on with regard to long positions. In the case of individual stock opportunities, strict stop losses should be followed on the downside, especially in small and midcaps. At this point, we like Dr Reddy’s with a time frame of 2–3 months. The stock was consolidating over many weeks near its life high, and it has now confirmed a breakout, which resembles a bullish cup and handle pattern. Thus, traders are advised to buy Dr Reddy’s in the range of Rs 6,040-5,960 with a stop loss of Rs 5,520 on a closing basis for an upside target of Rs 6,720 and Rs 6,960 in the coming 1-3 months.

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