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During the last week, we started on a positive note however it lacked follow up buying since it was an expiry week and as we were placed in the vicinity of the psychological level of the 18,000 mark. We then witnessed a gradual fall within between bounce to eventually end with the loss of 1.80% around the 17,500 levels. This resulted, Nifty ending its weekly winning streak.

Looking at the placement of the RSI smoothened oscillator in the deep overbought territory along with the negative divergence we were cautious during the second half of September month. We have already seen a glimpse of it during the week gone by but nothing much has changed. We remain cautious and we sense any bounce is likely to face a stiff hurdle around the 17,800-17,950 mark. On the flip side, 17,450 – 17,300 is seen as key support and the first sign of weakness will be seen only if we slip below the same. In addition, we also witnessed a spike in India VIX indicating that volatility is likely to remain on the higher side.

Even though the benchmark slipped lower during the week, we witnessed that the broader markets continued with their buzz and many outperforming opportunities were seen outside the index. Traders are advised to focus on stock-specific trades however they should look to book timely profit.

Stock recommendations:
Bata India | Buy | Stop loss: Rs 1,760 | Target price: Rs 1,978

Post the swing low created in the April month around the 1,260 levels, the stock prices have continuously moved higher with the higher top higher bottom formation. In such a scenario, every dip was getting bought and the same was seen during the week gone by. On the daily chart after a small consolidation, the prices have resumed the uptrend by breaking consolidation on the upside confirming a ‘Symmetrical Triangle’ breakout. Volume activity was dried up during the consolidation phase however with the bullish breakout we can see a sizable increase in volume. Moreover, we are also observing a fresh buy crossover in the RSI smoothened oscillator around its mean of 50 levels that augurs well for the bulls. Looking at all the above scenarios, we sense a strong outperformance in this counter and recommend a buy at current levels for a target of Rs 1,978 in the near term. The stop loss needs to be placed at Rs 1,760.

Dr Reddy’s Labs | Buy | Stop loss: Rs 4,780 | Target price: Rs 5,320

During July month we witnessed a massive fall in the stock prices however this fall got arrested around the 78.6% retracement of the recent rally seen from the levels of 4116 to 5589. In the last couple of months, we have seen a gradual rise in the stock prices and also a formation of higher bottom on the daily chart. The stock prices are now almost on the verge of confirming a bullish Cup N Handle breakout and the placement of momentum oscillator RSI smoothened supports the pre-emptive buy. Prices have also closed above 89EMA and 200SMA indicating that the medium and long term trend has turned positive. During the week gone by we witnessed many pharma stocks outperforming and Pharma Index confirming a bullish ‘Inv Head N Shoulder’ breakout. Based on all above facts, we sense this pharma heavyweight is likely to outperform and hence we recommend a buy at current levels for a short term target of Rs. 5320. The stop loss can be placed at Rs. 4780.

(The writer is technical analyst at Angel One Limited; views expressed are personal)