A higher time frame i.e. the monthly chart shows that the index had formed an Engulfing bear candle for the February & as a follow through of the bearish candlestick pattern the index tumbled down in the last month.
Gaurav Ratnaparkhi
Sharekhan
The Nifty, in the week gone by, posted a positive close after four consecutive negative weeks. The index bounced back from sub 10000 levels to 10200 in the truncated week. The pullback was fuelled by short covering owing to the expiry of the March contract.
Nevertheless, as expected, the pullback halted near the hurdle zone of 10200-10230, which is a crucial resistance area from short term perspective. The Nifty can form distribution over there before the next leg down kicks in.
A higher time frame i.e. the monthly chart shows that the index had formed an Engulfing bear candle for the February & as a follow through of the bearish candlestick pattern the index tumbled down in the last month. The overall structure suggests that the follow through on the downside can continue in the month of April as well. The recent bounce is a minor degree bounce & is unlikely to develop into a larger structure on the upside.
So the multi time frame analysis shows that the undertone for the market is bearish & the weakness is likely to persist for the April series as well. For last couple of months, any attempt to form a pullback has been facing resistance near the crucial daily moving averages & each leg of the subsequent sell off is making lower lows i.e. bringing Nifty to lower levels with each round of fresh sell off. The same pattern can be expected for the April series also. 10200-10300 would be the high probability area to initiate fresh short position for targets of 9950-9800 in the short term
Stock Ideas for short term:
Ramco Cem Fut: Sell, Stoploss 767, Target 673
Ramco Cements is in a distribution phase for last several weeks. On the higher side, 755-765 is acting as a strong resistance zone. The wave structure shows that the bounce over last couple of months is a corrective structure & is likely to be followed by a downward move. The daily & weekly momentum indicators are also indicating downside for the counter.
Capital First: Buy, Stop Loss Rs 609, Target Rs 690
Capital First has witnessed significant correction since January this year. The recent structure, however, shows that the stock is forming an Ending Diagonal. The pattern would mark end of the correction from short term perspective at least. The daily momentum indicator is showing positive divergence, which is also a bullish sign.
Disclaimer: The author is a senior technical analyst at Sharekhan. The views and investment tips expressed by investment experts on moneycontrol.com are his own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.