Markets so far going by the adage; Sell in May and go away

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In spite being a truncated trading week it was not at all short of action. It was a dramatic week, with event seen in domestic as well as global front. For the last few weeks our markets were relatively outperforming the global peers however on Wednesday a surprising rate hike by RBI resulted a sharp sell-off. This was then followed by a sharp sell off in US Markets that dragged our markets further lower to eventually end the week with a cut of around 4% tad below 16400.

During the week gone by, Nifty broke below some of the crucial support levels one by one with ease, and definitely, the bears seems be in a strong momentum. Technically, Nifty has broken below 61.8% retracement of the rally seen from the March swing low and it does open doors for further weakness in the near term. The next support levels as per the retracement theory comes around 16190 – 16000 and that is not far away from the current levels. We have already seen a sharp cut in the near term and in between sharp bounce back cannot be ruled out hence going aggressive shorts at current levels would be no wise. Selling at higher pressure may continue and in such scenario, 16500 – 16700 is the immediate resistance. We sense the volatility is likely to remain on the higher side and there is possibility to see wild swings on both the sides hence traders need to keep positions light and avoid undue risk.

Stock recommendations:

NSE Scrip Code – HEROMOTOCO

 View                  –   Bullish

Last Close          –   Rs. 2564

Justification – During the previous week, the stock prices had confirmed a bullish reversal pattern breakout known as ‘Double Bottom’. This was then followed by a consolidation for few days however when things looked bleak in the broader market this stock had a stand out performance to break above recent consolidation and to confirm a continuation of uptrend. If we analyse the volume structure good increase in volume is seen during the up move as compared to volumes during the down move; this augurs well for the bulls. In addition the momentum oscillator i.e. RSI is well sustained in the positive zone supporting the buy call. Looking at the entire above scenario, we recommend a buy at current levels for a short term target of Rs. 2830. The stop loss can be placed below Rs. 2425.

2.  NSE Scrip Code – SBICARD

 View                  –   Bearish

Last Close          –   Rs.752.90

Justification – On the daily chart, stock prices have confirmed a bearish pattern breakdown know as ‘Inverse Cup and Handle’. The said break down is seen with a bearish gap that can be termed as a breakaway gap. In addition, prices have broken below the 61.8% retracement of the recent rally indicting further weakness in the near term. Moreover, RSI has slipped in negative territory supporting the sell signal. Hence, we have a bearish view on this counter where we see prices slipping towards the levels of Rs. 700 in the near term. The view remains intact as long prices stays below 780.

(This article is written by Rajesh Bhosale, Angel Broking analyst)