The Banking sector has underperformed the benchmark index and broader market indices like mid and small cap segments have shown weakness in line with the market.
By Nagaraj Shetti
After showing higher level weakness on Tuesday, Nifty shifted into a smart upside recovery after opening lower on Wednesday and closed the day lower by 39 points. A small positive candle was formed with minor upper and lower shadow and Wednesday’s opening downside gap has been filled completely. This action signals the emergence of buying interest from the lows. But, this upside recovery has not changed the short term negative trend status so far. Though Nifty declined in the last few sessions, the sharp downside momentum was absent, as we have observed range movement with negative bias.
The Banking sector has underperformed the benchmark index and broader market indices like mid and small cap segments have shown weakness in line with the market. This market action could signal an upside bounce, but there is a likelihood of selling emerging from the highs.
The crucial opening down gap of September 4 remains intact after four sessions of its formation. This gap could be considered as a bearish exhaustion gap, which is more often formed near important top reversals. The recent swing high of 11794 (bearish engulfing of daily and weekly chart) remains intact and that swing high could be considered as an important top reversal so far now. This high is unlikely to be breached in a hurry.
The short term trend of Nifty remains negative, but the formation of range movement with upside recovery could signal chances of minor upside bounce from here or from the lows. The expected upside bounce attempt could be short lived and the downside momentum is likely to pick up thereafter. Immediate resistance to be watched at 11350-11400 and support is placed at 11200-11150 for the next 1-2 sessions. The near term downside target for the Nifty remains at 11100-11000.
BIOCON LTD: BUY- (CMP Rs 428.40)
After showing minor weakness in the last few sessions, the stock price has witnessed a sustainable upside bounce on Wednesday and closed higher. The stock price formed a positive candlestick pattern of bullish engulfing, which signaled more upside in the near term. The volume has expanded during recent up move and weekly 14 period RSI is placed above 60 levels. This pattern indicates further strengthening of upside momentum in the near term.
Buying can be initiated in Biocon Ltd at CMP (428.40), add more on dips down to Rs 415, wait for the upside target of Rs 460 in the next 3-4 weeks. Place a stop loss of Rs 407.
HCL Technologies Ltd: BUY – (CMP Rs 722.60)
The IT stock (HCL Tech) has been in an intermediate trend over the last many months. The stock price has witnessed sustained up move as per the positive sequence of higher tops and bottoms over the period of time. After showing a sideways range movement in the last one month, the stock price is now making an attempt to stage an upside breakout of the range at Rs 730 levels.
The support of 20 period EMA on the daily chart has offered base for the stock price so far and supported the uptrend. Recently, the stock price showed up move from near the immediate support of this 20 EMA at Rs 706. Volume and momentum oscillator on the daily chart signal positive outlook ahead. Buying can be initiated in HCL Technologies Ltd at CMP (722.60), add more on dips down to Rs 695, wait for the upside target of Rs 780 in the next 3-4 weeks. Place a stop loss of Rs 675.
(Nagaraj Shetti is a Technical Research Analyst at HDFC Securities. The views expressed are the author’s own. Please consult you investment advisor before investing.)