The Nifty seems to be losing strength gradually on the charts. During Monday’s session, it plunged more than 80 points, with a negative market breadth of 0.27, the weakest since June 27.
Midcap and smallcap indices have registered fresh 52-week lows, indicating gross underperformance against the Nifty. The gap in performance between the Nifty and mid and smallcap indices has widened significantly in recent days. In this scenario, either mid- and smallcap indices has to rise or the Nifty has to fall to narrow down the extended gap.
Nifty’s immediate support is seen at 10,900, where maximum open interest was built during last week. Previous two tops on the daily charts are placed at 10,893 and 10,929, which could also act as support. If the Nifty breaches 10,900 on a closing basis, it would be sign of a bearish trend reversal.
By closing above 11,020 last week, the index achieved its 61.8% Fibonacci extension target of the entire swing seen from 9,952 (March 23 bottom) to 10,929 (May 15) and from 10,929 to 10,417 (May 23 top). The Nifty has to sustain above 11,020 to extend the rally towards its 100% extension target of 11,395.
On July 12, the Bank Nifty registered a bearish double top pattern at 27,165. The same top was seen on May 31. We would remain bearish till it stays below the strong resistance of 27,165. The next support for the index comes around 26,100 levels.
Positional trend of midcap and smallcap indices are bearish with lower tops and lower bottoms and both indices forming new 52-week lows. However, positional trend of the Nifty/Sensex is still bullish with higher tops and higher bottoms. Last week, we saw the Sensex registering a new all-time high.
The Sensex and Nifty are hiding more than they reveal. It would be advisable to protect long positions in Nifty with a strict stop loss of 10,900 on a closing basis. On violation of 10,900, the Nifty could extend its fall towards the next supports of 10,820 and 10,760.
Here are 3 stocks that can return 8% in the near term: Reliance Industries: Buy | CMP: Rs 1,076 | Target: Rs 1,140 | Stop loss: Rs 1,040 | Return: 6%
The stock price has recently registered new all-time high at Rs 1,109 with rising volumes. By sustaining above Rs 1,000, it has broken out from the last 8-month’s consolidation pattern on the monthly charts. The price has been forming higher tops and higher bottoms. Moving average and oscillator setup is bullish on short to medium term charts.
We recommend buying Reliance for the upside target of Rs 1,140, keeping stop loss at Rs 1,040.
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd. Raymond: Sell | CMP: Rs 828 | Target Rs 760 | Stop loss: Rs 875 | Return: 8%
On January 2018, the stock formed double top formation at Rs 1,150 odd levels and reversed southward. Recently, the stock price breached the previous bottom support of Rs 850 on the weekly charts. Volumes were up along with the price fall of 6.5% during yesterday’s session. Selling pressure was witnessed in all the major textile stocks during yesterday’s session. Oscillators have also turned bearish on the medium term charts.
We recommend selling Raymond for the downside target of Rs 760, keeping stop loss at Rs 875.
United Spirits: Sell | CMP: Rs 574 | Target: Rs 534| Stop loss: Rs 600 | Return: 7%
The stock has recently breached the crucial support of the multiple bottoms placed around Rs 592 on the weekly charts. It has also breached 200-DMA support with rising volumes. The price has started forming lower tops and lower bottoms on the weekly charts. Oscillators have also turned bearish on the medium term charts.
We recommend selling United Spirits for the downside target of Rs 534, keeping stop loss at Rs 600.
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