By Vishal Wagh
Nifty has given breakout and made a new all-time high but it has failed to get any follow-up, similarly, global markets are also facing resistance at all-time highs. On Friday, US markets closed in red with cuts of approx 0.80% in all major indices. Crude has settled lower for the week. USDINR is holding above 74.50 while Dollar Indices closed strongly at 92.72.
On weekly basis, Nifty closed at an all-time high. This is the sixth week of consolidation for the Nifty within the range of 15550-15950 level. Meanwhile, on the daily basis, Nifty has managed to conquer recent high but the lack of follow-up buying brings it within the range. Till the time said range is in place no major move is expected from Nifty.
The Bank Nifty index has also shown promising move, but bulls’ lack of follow-up has kept it below 36000. Though, compared to Nifty, the Bank Nifty has a stronger higher high higher low formation which is a bullish indication. On the higher side, 36600 will be the resistance zone whereas support is placed at 34500 levels.
The Volatility index is getting lower and lower with every passing trading session, indicating a sideways to positive movement for domestic markets in the coming few days. Further contraction of volatility may be seen.
Dollar Index (92.72)
The Dollar index has formed and double bottom pattern at 89.20 levels and now it is getting stronger. The next target will be 93.60-93.80 zone. Any breakout above 93.80 will open doors for 98-100 levels. It shows a very strong upside in USD.
The USDINR has conquered the barrier of 74.40, it has made a high of 74.90 just below the weekly supply zone of 74.91-75.62 and closed just above 74.40. So, in short, it has given breakout and tested the breakout levels in throwback. At the same time, resistance will be seen between 74.91-75.62. It shows that the Indian currency may depreciate if levels of 74.91 get broken. There will be a tough fight between sellers and buyers till 75.62 get conquered.
The Crude has cooled off from the higher levels of $ 76.98, showing strong momentum with the higher high higher low formation in place. The difference between shorter-term and longer-term moving averages is getting expanded. On the weekly basis, the supply zone of $ 73-76.50 had been filled but supply on higher levels overpowered the demand, and prices face resistance just above the supply zone. In the case of cutting above $76.91, equilibrium may shift towards the higher side and the next target will be a monthly supply zone of $95-$98. On the flip side, any penetration below 69 will open the door for further correction and the price can move towards $ 56. In short, volatility in crude may continue.
Buy Larsen & Toubro
L&T has given the strongest breakout at an all-time high and it is sustaining well above it. The difference between 20 ema and 50 ema is expanding. The slope of both ema is strongly upwards. It indicates a big upside in the stock if broader base indices manage to hold current levels. As it has moved in uncharted territory any target on the upper side is possible. But on the downside, one should keep stop loss below 1470 levels for a probable upside target of 1900-2200 in the next six months. For very short-term traders the strategy should be buying on the dip.
Sell Eicher Motors
The Eichermotors has given breakdowns from upward sloping trend line at 2711 and decent follow-up has seen post that. RSI(12) has moved below 40 levels. Scrip has penetrated 50 EMA. Chart formation is lower low lower high on a daily basis. All of these show downside open in the stock and pivot levels of 2450 can be a test soon. The stop loss should be above 2720 levels.
(Vishal Wagh is the Head of Research at Bonanza Portfolio. The views expressed are the author’s own. Please consult your financial advisor before investing.)