What are the indicators that you are seeing on the charts? We ended at the low point of the day at the end of the week. What is that telling you?
Over the last four days, the market texture has completely changed. The year 2022 started off with a lot of pessimism as well as a defensive nature from market participants. But then we were few surprises with a good rally coming in. In the last four days, again, the selling pressure has intensified. Now, one of the reasons why I believe that on Friday we saw a bounce coming out on Nifty is because of two important reasons. One of them was the index touching exactly the 50-day moving average on the spot levels. So, the 50-day moving average was 17,495 to 17,500 odd. We made a low of 17,485 approximately on the intra-day charts and from there, we saw a bounce of almost 100-150 points on the Nifty. When you are ending into a round strike 17,500-17,000 levels that is where a lot of put writers have their open positions. The market wants to generally protect those kinds of strong psychological marks. So, what you saw on Friday could probably have a result in effect maybe for the first couple of days of next week.
You might see some degree of bounce shaping up on the indices but that four days of selling which you have seen on the trot for the indices indicate that there could be more pain ahead in terms of individual stocks. Some of the stocks that have gone to oversold territory can see some bounces but some of them which have rallied up significantly are the ones that could get into a correction phase. A lot of chop and churn in terms of sectors is something which I am expecting over the next couple of weeks for the indices.
What are your picks for the new week? Volatility is going to be the name of the game; how do you play that?
Absolutely. It’s very difficult but you have to ride it with a mixed set of trading positions. I am suggesting one buy and one sell, expecting a lot of choppiness this week. First is a buy on Trent. Trent, Aditya Birla Fashion, these stocks have done exceptionally well for themselves. Trent has gotten into a consolidation for itself, forming a bullish flag and a pennant kind of a combination pattern, expecting a breakout over the near term. I would suggest a buy with Rs 1,245 as a positional target and stop-loss could be kept at Rs 1,155. One of the stocks I can recommend a shorting candidate is Havells. Now, the stock went down by 5%-5.5% on Friday. It is now nudging closer to its 200-day moving average; weakness over the last one or two weeks has been quite prominent in this stock. So, I am expecting more correction over the near term for the stock. One can sell with a target of Rs 1,200 and a stop loss at Rs 1,270.
Source: The Economic Times
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