Markets in consolidation mode, bias remains weak; wait for strength to emerge before going long

The bears would gain more control once the recent intermediate low of 15735 is broken. Traders should wait for strength to emerge before going aggressively long.

Nifty outlook
Bears in control. (Image: REUTERS)

By Subash Gangadharan

On the Daily chart, the Nifty had recently broken out of the 16415 resistance and headed higher. It however found resistance around the 16800 levels which also roughly coincides with the 200 day EMA. The Nifty subsequently corrected and is now trading just above the 20 day SMA at 16260. Many stocks are also correcting and failing to hold on to their recent gains. Combined with the negative market breadth, this is a sign of weakness and caution is therefore warranted. 

While we remain open to further pullback rallies in the very near term, we must remember that the intermediate trend remains down. The bears would gain more control once the recent intermediate low of 15735 is broken. Traders should wait for strength to emerge before going aggressively long.

Sell GNFC

GNFC is in an intermediate downtrend as it recently broke the support of 752 and has been moving lower in the last few weeks. Last week, the stock reacted from close to the 20 week SMA. This indicates that the downtrend looks set to continue.

Technical indicators are giving negative signals as the stock is now trading below the 20 day and 50 day SMA. Momentum readings like the 14-week RSI are in decline mode and not oversold, which implies potential for more downsides.

We, therefore, expect the stock to correct further in the coming sessions. Sell between the 624-628 levels. CMP is 626.1. Stop-loss is at 660 while the downside target is at 570.

Sell McDowell

McDowell is in an intermediate downtrend as it has been making lower tops and lower bottoms for the last several weeks. Last week, the stock reacted from close to the 200 day EMA. This indicates that the downtrend looks set to continue.

Technical indicators are giving negative signals as the stock is now trading below the 20 day and 50 day SMA. And both these moving averages are sloping down. Momentum readings like the 14-week RSI are in decline mode and not oversold, which implies a potential for more downsides.

We, therefore, expect the stock to correct further in the coming sessions. Sell between the 770-774 levels. CMP is 772. Stop-loss is at 800 while the downside target is at 720.

(Subash Gangadharan is a Senior Technical and Derivative Analyst at HDFC Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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