Nifty likely to consolidate around 10,700; Buy Asian Paints for short term

Jaydeb Dey

The Nifty in the previous session ended 0.2 percent lower at 10,718.05. Failing to breakout resistance placed around 10,780 followed by day long consolidation around 10,700 mark led to a bearish body candle on daily chart.

Considering the broader up-trend we still prefer buy-on-dips around critical supports placed around 10,700 and 10,640. Upside pivotal resistance is placed around 10,780.

On the Nifty hourly chart; ADX is trending higher and recovered above twenty despite RSI shows negative divergence, which implies this uptrend is likely to continue further. Hence, intraday dip towards 10,700 and 10,640 might be a decent opportunity for the next leg of up-move towards 10,780 and 10,820.

Nifty patterns on multiple time frames show; it ended the session with a bearish body candle around 61.8% Fibonacci retracement, placed around 10,700, of the entire correction from Nifty all time high to its recent low around 9950 levels. However, we don’t rule out Nifty retesting 10,640, which might be decent buying opportunity.

The Bank Nifty in the previous session ended 0.14 percent higher at 25,568.30. Upside resistance is placed around 25,750. Downside pivotal support is placed around 25,340.

Bank Nifty 'Option Chain' analysis in terms of percentage change in OI (at the end of yesterday’s session) - Bank Nifty Fut (CMP- 25643.70) ended at 75 points premium against Bnak Nifty (CMP- 25,568.30). Huge long OI build up in 25'700-PE followed by 25'600-PE, 25’500-PE, and 25’400-PE against minor long OI build up in 25'600-CE and 25'700-CE ahead of today’s expiry suggests, Bank Nifty Fut is likely to face resistance on rise around 25,700.

Bank Nifty Fut may continue to face resistance on rise around 25,700. On a similar note, intraday trend is expected to remain negative within the broader trading band of 25,700 to 25,400.

This view is subject to change if and only if Bank Nifty Fut starts moving decisively above 25,700.

Based on thorough technical study, the research firm recommends Asian Paints which can give up to 5% return in the near short term:

Asian Paints: Rating: Buy | Target: Rs 1260, stop loss: Rs 1170, Return: 5%

The stock ended the session with a bullish body candle above the previous reversal point around Rs 1200. Steeply rising RSI is an indication if strengthening uptrend.

Based on above mentioned observations, the house recommends Asian Paints as a buy on dips for the short-term upside target of Rs 1260.

Disclaimer: The author is Technical Analyst at Stewart & Mackertich Wealth Management Ltd. The views and ideas expressed above may have been suggested to the clients of Stewart & Mackertich Wealth Management Ltd. It is advised that investors/traders should consult with their Certified Experts before taking any investment decision.