If 11,800 is breached on a closing basis, it could drag the Nifty lower towards its 50-DMA support of 11,650 zone.
The ongoing DHFL crisis, delay in monsoon arrival and US President Donald Trump's extended tariff threats on China and Mexico led to a sell-off on Dalal Street on Thursday.
After forming a bearish Harami candlestick pattern on the daily chart on Tuesday, the Nifty saw an extended level of selling pressure as the psychological support of 12,000 was broken.
Our weekly analysis also indicates that the Nifty is facing stiff resistance at the rising trend-line resistance zone which is around the 12,200 levels.
Going forward, the 11,800 is the vital support zone. If that is breached on a closing basis, it could drag the Nifty lower towards its 50-DMA support of 11,650 zone. It would be wise to remain cautious in the near-term.
The Nifty Midcap100 index which showed signs of a breakout from a falling channel pattern on the weekly chart is finding it difficult to sustain above the breakout zone. This could lead to some selling pressure even the midcap space in the short term.
Here is a list of top three stock which could give 5-6 percent return in the next one month:
Hindustan Unilever: Buy| Target: Rs 1,939| Stop Loss: Rs 1,791| Upside 5 percent
The stock has shown immense strength at a time when the market has sold off sharply. The stock has broken out from a consolidation pattern on the weekly chart, accompanied by a smart uptick in traded volumes.
We expect the stock to continue its outperformance in the medium term. Hold long positions with a mentioned stop loss on closing basis.
Wockhardt June Futs: Sell| Target: Rs 364| Stop Loss: Rs 398| Downside 6 percent
The stock has been consolidating for the past three weeks, and it has failed to surpass its 50-DMA. In addition, Wockhardt has also formed a bearish engulfing pattern on the daily chart, indicating that the weakness is likely to persist. Hold short position with a mentioned stop loss on a closing basis.
Shriram Transport Finance June Futs: Sell| Target: Rs 1,007| Stop Loss: Rs 1,103| Downside 6 percent
The stock was in a solid uptrend in the past three weeks. However, it failed to carry forward the momentum as it found stiff resistance in the long term 200-DMA.
The negative crossover on the relative strength index and a breakdown from a rising channel pattern on the daily chart are indicating the stock is likely to extend the current weakness.
(The author is a Senior Technical Analyst, IIFL)
Disclaimer: The views and investment tips expressed by investment expert 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.
