Spectacular recovery by bulls after an initial hiccup; Nifty reclaims 17500

Despite strong global cues, our markets started the week on a negative note and slipped further to close at the lowest level in the last three months around the 16,900 mark. The action was not done yet as further improvement in the global cues couldn’t keep our markets lower and a sharp rally in the next two days resulted in benchmark retesting the territory of 17,500.

Post such wild moves, Nifty traded in a range for the last two days and eventually ended around it with gains of 1.80% against the previous week’s close.

If we recall our last week’s outlook, we had clearly mentioned that the benchmark may see a further consolidation between 16,800 – 17,500 before heading for the next leg of the action. This is precisely what has happened during the week as Nifty almost tested the lower end and closed at the mentioned higher range. Now if we analyze the last two days trading activity, buying was definitely seen on the intraday dips.

However, we did see some tentativeness at higher levels as the benchmark has already rallied more than 3% from the intra-week low and has reached a cluster of resistance zone seen in the vicinity of 17,500 – 17,600 – 17,700.

During the week, we did participate in the relief move but directionally, we are still a bit skeptical whether the market has enough strength to surpass the higher boundary of this range. Hence, one needs to now start lightening up longs if Nifty extends the relief move in the coming sessions. On the flip side, we sense the base has shifted higher and the bullish gap left on Wednesday at 17,250 – 17,300 is to be seen as key support. 

 During the week, we witnessed many astonishing moves in midcap and small-cap stocks and traders can continue with the stock-centric approach; however they need to be very selective going ahead as we are approaching the resistance zone. 

Stock recommendations:

1.  NSE Scrip Code – POLYCAB

 View                  –   Bullish

Last Close          –   Rs 2,471.64

 In the last couple of months, the stock prices witnessed volatile swings within a range, and recently after taking support on the previous swing low the stock prices have sharply rallied to close above a descending trendline.

This has resulted in a price formation breakout known as the ‘Descending Triangle’. The said pattern breakout is witnessed with a good increase in volume and a strong bullish candle. With all this evidence we sense a trending move in this counter and hence we recommend a buy for a short-term target of Rs 2,710. The stop loss can be kept at Rs 2,348.

2.  NSE Scrip Code – THERMAX

 View                  –   Bullish

Last Close          –   Rs 1,845.85

This stock is in a strong uptrend and recently during the start of the November month the stock prices sharply rallied from the levels of 1,336 to recent high of 1,895 within a matter of few days. Since, the stock prices witnessed such sharp move in short span of time the oscillators went into overbought zone which resulted a price correction during the last few weeks. Now after a brief consolidation, the stock prices have now confirmed a continuation bullish breakout known as ‘FLAG’ pattern.

After analysis, the volume pattern has moved typically in sync with the pattern characteristic where huge volume was seen during the rally (pole formation) and low volumes during consolidation (flag formation). In addition, after cooling down from the overbought zone the momentum oscillator i.e. RSI is signaling a fresh buy signal with its smoothened moving average. With all the above technical evidence, we recommend a buy in this counter for a short term target of Rs 2,090. The stop loss can be placed at Rs 1,720.