Avp-Technical & Derivatives, Anand Rathi Share & Stock Brokers
The 12,000-mark acts as a strong hurdle for the coming sessions but if the Nifty crosses that level then the current rally may continue towards 12,300, according to technical analysts. Some of the technical picks where investors can catch dips for 10-15 per cent in the short term while keeping their stopout levels below 5-7 per cent from current close are SRF, MFSL, Divi’s Lab and Titan.
Where are we: Nifty closed in the negative territory in the last trading session unable to sustain above 12,000 levels which indicates that the breakout on the upside has failed and Nifty has again fallen back into 11,840-12,070 levels. Nifty is trading at a very critical juncture as wherever this range breaks there will be further trend established. Hence, one needs to watch whether Nifty breaks upward or below.
What is in store: Nifty is consolidating in a range and in that process it has formed an expanding triangular pattern. The rise since 11,090 levels till 12,034 levels appears to be an impulsive move i.e. a five-wave rising structure; hence this consolidation can either be in its 5th wave up or in wave 4 consolidation. If this is a wave 4 consolidation and wave 5 up is pending, then Nifty will not break 11,840 initially. In a worst case, if it is below 11694, the hope for wave 5 up will be negated completely and Nifty will enter into a larger correction. On the flip side if nifty holds 11,694 levels then wave 5 up will be possible which will take Nifty to 12,250-12,300 levels which is the upper end of the rising wedge pattern as well.
What could investors do: Based on the above observations, investors should continue to hold on to their long positions till the critical 11,694 level is held; however, if it breaks, then one has to exit from longs as the risk of further downside will increase below 11,694 levels. If Nifty breaks 12,034 levels, then the Investor is also advised to add to more positions as above 12,034 levels the Index is expected to zoom till 12,250-12,300 levels. Stocks such as Kotak Bank, Vedanta, Hindalco, HDFC Bank look good. Hence, when Nifty breaks out from the above range these stocks will get better returns in the short term.