Here's how to trade in expiry week

The week gone by was majorly dictated by the global cues. It started on a negative note as the benchmark Nifty tested levels around 17,300 however as a relief move was seen in the global markets we witnessed a complete turnaround. Nifty not only recovered its lost ground but with strong traction in the last two sessions managed to end with handsome gains making a new milestone around 17,950. Nifty, eventually ended around the 17,850-mark with a gain of 1.52% to the previous week close.

The bulls are in strong momentum and as of now, there are no signs of weakness. However, on Friday, we did see some tentativeness as Nifty reached the psychological level of 18,000. If we analyse the momentum indicator RSI smoothened its placed in overbought zone and we can also observe negative divergence hence traders are advised to avoid aggressive bets and keep booking timely profit. For the coming week, which is also a monthly expiry we see resistance around the 17,900-18,000 mark. On the flip side, key support is visible around the 17,700-17,650 mark.

Stock recommendations

MCX | Buy | Stop loss: Rs 1,597 | Target price: Rs 1,785
During the fag end of August month, we witnessed a sharp upsurge in the stock prices accompanied by huge increase in volume from the long term support zone of Rs 1,450. Post that the stock prices entered into a consolidation phase as the oscillators were in overbought territory. Now prices have broken above the recent consolidation confirming a bullish Pennant breakout that is taken as a strong continuation pattern. The stock is already trading above the multi-year bullish breakout levels and with the recent impressive move from the stocks from the segments like broking, exchange, depository we are upbeat on this counter. RSI indicator is positively placed giving a fresh buy signal with its smoothened moving average supporting the buy call. Hence, we recommend a buy at current levels and on dips to Rs 1,650 for a near term target of Rs 1,785. The stop loss can be placed at Rs 1,597.

Mahindra & Mahindra | Buy | Stop loss: Rs 745 | Target price: Rs 855

For the last few weeks, the stock prices were sulking around its strong support of Rs 740 that has been acting as a strong demand zone right from the start of this calendar year. During the last week, we witnessed a strong move from the support levels to break above the recent consolidation zone and also to form a bullish candle on the weekly chart. On the daily chart, prices have closed above 50SMA and 89EMA indicating that the short to medium term trend has turned positive. In addition, we are witnessing that the RSI has entered a positive zone and looking at the favourable reward to risk ratio we have a bullish view on this counter.

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