By Nagaraj Shetti
The weakness continued in the market for the fifth consecutive session on Wednesday and Nifty closed the day lower by 71 points. After opening with an upside gap of 123 points (body gap, not a western gap) on Wednesday, the market failed to sustain the opening gains and started with intraday weakness soon after the opening. The intraday downward correction with range bound action continued for the rest of the session and Nifty closed the day near the lows. A long negative candle was formed on the daily chart that has completely overlapped the similar negative candle of the previous session. Technically, this pattern indicates an inability of the market to sustain the gains. Normally, such overlapping candles after a reasonable downward correction hints at a possibility of reversal pattern on the upside post confirmation.
Though, Nifty placed at the new swing low of 16,938, there is no indication of any lower bottom forming at the lows. The positive divergence pattern has started to form in Nifty/RSI daily and in intraday (60 mins) time frame charts, but still there is no price confirmation for the same. The short-term trend of Nifty continues to be weak. There is a possibility of further weakness down to 16,800 levels, before showing any meaningful upside bounce from the lows. Immediate resistance is at 17,200 levels.
Stock Picks
National Aluminium Company Limited
CMP: Rs 83.55
Call: Buy
The metal stock has been in a steady uptrend amidst a range movement over the last one month. We observe formation of consistent higher bottoms and the stock price is repeatedly testing the crucial overhead resistance of around Rs 84-85 levels. Presently, the stock price is in an attempt to break out of the hurdle. Volume has started to expand during price upside movement and the daily RSI is in an attempt to move above the crucial upper area of 60. The overall chart pattern suggests more upside ahead.
Buying can be initiated in NATIONALUM at CMP (Rs 83.55), add more on dips down to Rs 80.50, wait for the upside target of Rs 90 in the next 3-5 weeks. Place a stop loss of Rs 78.
Can Fin Homes March Futures
CMP: Rs 520.65
Call: Sell
The home finance stock as per weekly chart has witnessed a sharp downward correction in the last one month. The steep weakness of this week has resulted in a decisive downside breakout of the important support of the ascending trend line at Rs 540 levels. The present weakness has been accompanied with rising volume and the daily 14 period RSI has moved below the key lower area of 40. The overall chart pattern indicates more weakness ahead.
One may look to create short positions in CANFINHOME March Future at CMP (520.65), add more on rise up to Rs 540, wait for the downside target of Rs 460 in the next 2 weeks. Place a stop loss of Rs 555.
(Nagaraj Shetti, Technical Research Analyst, HDFC