One can look to build a short position at the current level and add to it as the Nifty breaches 10200 on the downside with 9950-9800 as targets in sight.
I would recommend using the bounce as an opportunity to align oneself with the larger downtrend and stay on the short side of the trade, Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas said in an exclusive interview with Moneycontrol’s Kshitij Anand.
Q) The Nifty50 rose nearly 2% for the week ended 6 April 2018 despite wild movements in either side. How do you see markets panning out in the coming week?
A) The Nifty, in the last week, witnessed the continuation of the short-term pullback that had originated from sub-10,000 levels in the penultimate week.
The pullback has done descent retracement of the previous fall and has now reached a crucial resistance zone i.e. 10300-10350. There are multiple parameters, lying over there, to restrict further upside.
At the end of the week, the Nifty has formed a Doji pattern on the daily chart in the hurdle zone of 10300-10350, which shows exhaustion of the pullback. Thus, failure over here would mean that the index might resume the larger downtrend in the coming week.
Q) Nifty flirted with its 200-DEMA in this past week, but there are plenty of stocks which are trading above their long-term average. How should traders decipher the data with respect to moving averages and are these stocks a value buy?
A) The Nifty indeed has been oscillating around its 200-DEMA since the last few sessions. At the same time, there are certain stocks that are comfortably trading above their respective 200-DEMA.
While it’s a good strategy to look at strong ones when identifying buy-side trading ideas, one should undertake stock specific approach during volatile times.
Instead of looking at a moving average in isolation, one should consider various parameters and take into account weight of evidence approach.
Q) What is your call on smallcap and midcap stocks which underperformed in the month of March? Should investors stay away or just book profits on rallies?
A) The small-cap and midcap space witnessed a steep correction over the last couple of months. Some of them attempted a decent pullback recently.
Nevertheless, the small-cap and midcap indices show that the upmove was just a technical bounce and the larger trend continues to be down.
Both the indices have reached their respective junction of 40-DEMA and the daily upper Bollinger Band, which is a high probability area for the next leg down to start off. Hence, one should book profits at the current level and stay on the sideline.
Q) What should be the ideal strategy of investors in April series – buy on dips or sell on rallies? Any F&O strategy which can be deployed for April series?
A) The Nifty, after the recent bounce back, has reached the hurdle zone of 10300-10350. The weekly as well as the monthly chart, however, shows that the index is not yet out of the woods and the larger outlook remains in favor of the bears.
Thus, I would recommend using the bounce as an opportunity to align oneself with the larger downtrend. So the strategy would be to stay on the short side of the trade.
One can look to build a short position at the current level and add to it as the Nifty breaches 10200 on the downside with 9950-9800 as targets in sight.
Q) Top 3-5 positional call which could give handsome returns to investors in April series?
A) Reliance Infrastructure: SELL Apr Fut | Stop Loss 472| Target 391| Return 17%
HCL Technologies Ltd| SELL Apr Fut | Stop Loss 992| Target 860| Return 9.7%
Glenmark Pharma Ltd| BUY| Stop loss 537| Target 620| Return 10%
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