Action packed week amid geopolitical tensions

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The week started with a huge knock from the bears as Nifty nose-dived to test the levels of 16800 with a cut of 3% on Monday.

On the following day post a positive start the benchmark retested the vicinity of Monday’s low only to get bought into and a smart recovery from there led Nifty back above 17300 levels. In the latter part of the week Nifty gyrated within a range of 17200 – 17500 and eventually ended below 17300 with a marginal cut compared to it’s previous week’s close.

During the week gone by, Nifty managed to hold on to the support levels of 200SMA and the January swing low around the 16800 and has given a sigh of relief for the investors. The question is are we out of woods (danger) and we would said certainly not as we are looming in the background of geopolitical tensions. Until we subside from this scenario; traders should continue to refrain from aggressive bets especially carrying them overnight.

Technically if we see Nifty after holding the previous swing low of January month has now started moving in a ‘Descending Triangle’ pattern. As per this pattern the price have a fair chance to break on either side of this pattern.

If Nifty closes above 17500 then we will have a bullish breakout that can push benchmark Index beyond 18000 levels whereas on the lower side 16800 is the key support. If this time we break below it then one should get prepared for challenging times in the market as we may see a strong down side.

Hence, for the monthly expiry week we would be keeping a close watch on 16800 – 17500 range and until then traders can prefer stock specific approach that can give opportunities on both sides of trend.

Stock recommendations:

NSE Scrip Code – SBILIFE

View – Bullish

Last Close – Rs 1150.50

Justification – In the last one month the stock prices have sharply corrected after marking an all time high around the 1300 levels. This fall has however got arrested around its strong support at 1100 that has acted as demand zone for three times in the last five months.

The said support also coincides with 200SMA and on the weekly chart we are witnessing prices bouncing from lower levels and forming a bullish reversal candle. On the daily chart, we are witnessing a bullish crossover in momentum indicator RSI that augurs well for the bulls. With a good risk to reward ratio at current levels we recommend a buy at current levels and on dips towards 1135 for a near term target of Rs. 1250. The stop loss can be placed at Rs. 1100.

2.  NSE Scrip Code – BHARATFORGE

 View                  –   Bearish

Last Close          –   Rs 694.15

Justification – The stock prices had already marked a lower top and now during the week the prices by slipping below its previous swing low have confirmed a ‘LOWER TOP LOWER BOTTOM’ bearish price formation. Prices are trading below key moving averages and during the week a bounce towards them got sold into indicating a change in polarity.

Momentum oscillator i.e. RSI as well has slipped into negative terrain indicating the bears are in momentum. Hence, we have a bearish view on this counter and recommend sell on bounce towards Rs. 700 for a near term down side towards Rs 610. The stop loss can be placed at Rs 740.

(The article is written by Rajesh Bhosale, Techinal Analyst, Angel Broking Ltd)