Market outlook: Bajaj to be bullish; Kotak to be bearish

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During the last week, we witnessed a roller-coaster move where initially markets started on a negative note and within a blink of an eye Nifty was down 300 points in the opening trade on Monday. This was however followed by recovery on the same day and then after some base formation at 17000 we witnessed a bounce back during the mid-week as some respite was seen in the global cues.

On Friday, Nifty almost tested 17,500 however bears again showed their dominance at higher levels and dragged Nifty back towards 17,200. Eventually, Nifty ended the week with gains of 1.18%.

Technically, Nifty witnessed moves on both the side keeping both the counter-parties happy however going with the lower top lower bottom formation on the daily chart and the sell-off in the fag end indicates that the bears still are in the control and it remains a ‘Sell on Rally’ market.

It seems Nifty is headed back towards 17,000 – 16,800 zone and whether it would be broken down immediately or we may see some consolidation in range 16,800 – 17,500; that only the time will tell. If markets continue to consolidate in a range, then traders can continue to get opportunities on both side of the trend. However, the volatility remains on the higher side, especially in the US bourses we have seen wild swings hence traders should avoid aggressive positions overnight.

Stock recommendations:

1.  NSE Scrip Code – Kotak Bank

 View                  –   Bearish

Last Close          –   Rs.1914.20

During the last week, when the Bank Nifty took support on the 200 SMA; some of the key private banks made an attempt of a strong bounce back however no major upside was seen in this counter. In fact on Friday when in the second half broader markets started coming down this counter was one of the major culprit to drag key indices lower.

Now on the daily chart, the stock has broken below its key support of 1930 and a bearish formation of ‘Head and Shoulder’ breakdown can be clearly seen. The prices have also closed below the key 89 EMA and RSI oscillator is already in the negative zone. We expect the underperformance to continue in this counter and hence we recommend a sell in this counter on a bounce of Rs. 1930 for a downside target of Rs. 1750 in the near term. The stop loss can be placed at Rs. 1995.

2.  NSE Scrip Code – Bajaj Auto

 View                  –   Bullish

Last Close          –   Rs. 3287.85

This stock has been under a significant pressure as it has slipped from its November swing high of 3,845 to the recent swing lows of 3,200. After such pain we finally saw a bullish reversal candle on Wednesday known as ‘Homing Pigeon’ and finally after a streak of 15 red candle we finally witnessed a green candle on Thursday.

If we analyze the momentum indicator RSI it has turned northward after testing the oversold zone and has now given a fresh buy signal with its smoothened moving average. With all the above scenario, we sense a healthy reward to risk ratio and hence we recommend a buy at current levels for a target of Rs. 3480. The stop loss can be kept at Rs. 3220.

(The article is written by a technical analyst from angelbroking, views are personal)