"Roughly, we are at the middle of the range, and that makes trading the index that much more difficult for in a range bound situation. You adopt the buy weakness and sell strength trading strategy," says Rajat Bose of rajatkbose.com
By Rajat Bose
rajatkbose.com
Nifty
The Nifty is caught up in a range-bound volatile situation. Its range is all but clearly defined: 10,650 on the upside while downside is still the unbroken support of 10,275.
Roughly, we are at the middle of the range, and that makes trading the index that much more difficult for in a range bound situation. You adopt the buy weakness and sell strength trading strategy; however, you take the trade only when you are close to the two boundaries, and not in the middle because the risk-reward ratio does not justify taking a trade in the middle.
If the index were to scale up/down to levels close to the boundaries mentioned, adopt the suggested buy-weakness and sell-strength trading strategy with stop losses placed beyond the boundaries by 50 points.
Bank Nifty
The index needs to be watched very closely for it has come close to its one of the most significant support zone between 24,737 and 24,483. The lower level of 24,737 is the point where the 200-day simple moving average (SMA) and 24,483 is the level where the 200-day EMA is located, and in between the two is the December 18 significant low of 24,617.
Thus, the range is very crucial for the Bank Nifty; even if the two 200-DMAs are tested that would happen for the first time since January 2017. When these are tested for the first time after so many months, even the fund managers come to do some bottom fishing.
I would suggest that don’t go short around this support range, rather after testing the range if the index were to show a bounce back, that should be bought. Of course, put a stop loss below 24,400 for any long trade that you take.
Below are the top trading ideas which can yield good returns:
Ashok Leyland: Buy | Stop loss below Rs 138.20 | Targets: Rs 144 & Rs 147 | Return: 4%
Bharat Petroleum Corporation: Buy | Stop loss below Rs 437 | Targets: Rs 451 & Rs 458 | Return: 6%
Statutory Disclosure: No personal positions. However, clients may have anyone or all the above.
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