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Eng
The truncated week started on a positive note however there was no follow-up move to sustain above the resistance zone of 18200. In fact, the benchmark crept lower in the remaining part of the week to eventually end at around 17750 with a loss of around two percent against its previous week’s close.
During the mid-week, we did witness in between thematic moves as on Tuesday we saw out-performance by FMCG and Pharma space whereas on Wednesday mesmerizing moves were seen in Auto stocks. However, on the last trading of the week i.e. on Thursday bears a complete control and all the sectoral indices ended in red. On the daily chart, a clear bearish price pattern formation of ‘Head N Shoulder is visible with its neckline level (breakdown level) placed around the 17700. This neckline zone coincides with key 50EMA and hence it would be crucial to see how markets react around this support zone. In our sense, we see the benchmark breaking below it as momentum is gripped by the bears and in such scenario a fresh leg of downside can be seen towards 17450 and 17250 levels. If in case we bounce from the support of 17700 then on the upside we are likely to face resistance around 18000 levels in the monthly expiry week.
To conclude, we advise traders to avoid trying to do bottom fishing as of now as in the near term we expect a decent correction in the broader markets.
The stock prices have been continuously making a new high however in spite of strong price move the momentum oscillator i.e. RSI was unable to make a new high thus indicating a negative divergence where distribution is seen a the top. For the last couple of weeks, the prices were trapped within a range of 1920 – 1980 and now it has broken this range on the downside confirming a bearish breakdown. The price movement has also resulted in a bearish candlestick pattern formation on daily as well as weekly charts hence indicating a short term bearish reversal. As we see a downside in this counter, we recommend selling in the range of Rs. 1900 – 1920 for a short term target of Rs. 1800. The stop loss can be placed at Rs. 1955.
Post making an all-time high at 472.5 in October month, the stock prices have seen a sharp price-wise correction. In this phase, prices witnessed a price bounce back towards 426 and now it has broken below its recent swing low thus confirming a bearish price cycle of ‘Lower Top Lower Bottom’ formation. On the weekly chart, prices have already formed a bearish reversal ‘Shooting Star’ pattern and now on the daily chart prices have closed below key support of 50 and 89 exponential moving averages. Thus with all the above observations, we sense further weakness in this counter and hence we recommend selling in range 405 – 407 for a short-term target of Rs. 365. The stop loss can be placed at Rs. 421.
(The author is a technical analyst at Angel One Limited; views expressed are personal.)
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