Weekly market update!

Last week in our 'weekly market update' we mentioned that nifty looks like forming a penant or flag chart pattern on daily charts & looks like it is heading towards 8500 if its penant or 8425 if its flag. Nifty moved perfectly as mentioned & made a low of 8406.

Now the nifty has touched support line of flag channel. While doing so it has broken 4 months long support zone around 8480-8540. This zone will act as a strong resistance for nifty & downtrending channel support line will provide support alongwith a gap formed in the month of July around 8350.
Overall nifty looks to be trading with a negative momentum. So any pullback towards 8480 should be used to create short positions with a stop above 8560 targeting 8350. If nifty moves below 8350, further decline towards 8180 looks possible. If nifty moves above 8540, it should move towards 8640.

Options pair trade in BPCL & Axis Bank!

BPCL (cmp 674) has been a extremely bullish stock in the past. This year also it has risen almost 90% from the lows of 365. Whereas after making a low of 370 in Jan this, Axisbank (cmp 485) rose to the levels of 640 but could not sustain there & is in correction mode.

We believe nifty will remain in sideways trend as it has been for last 3 months. In a sideways market, bullish stock move higheror do go down & bearesh stocks move lower or do not move up. Assuming BPCL to remaain bullish or sideways & Axis bank to remain bearish or sideways, we recommend selling 1 lot of BPCL 660 pe @ cmp 13.5 & selling 1 lot of Axisbank 500 ce @ cmp 8.5. We are expecting BPCL to move towards 700 & Axisbank to move towards 465. If both the stocks move as per expectations, the BPCL pe should be go to 5 & Axisbank ce to 3. The target profit for this strategy is premium inflow of Rs. 16800.00. The SL for this strategy should be premium outflow of Rs.35000.00. The total margin required is Rs. 205000.00.

Weekly nifty update!

In the last post, we mentioned resistance line to be possible target for the nifty. Nifty touched  the rising resistance line. & reversed to close @ 8866 levels to form a shooting star candle on weekly charts. (See the charts below.)

Shooting star candlestick pattern is typically a trend reversal pattern in an uptrend. But ideally it is a 3 candlestick pattern in which second candle is isolated from first & third candles on upside so we can say that  third candle gives confirmation or negation of the pattern. So next week  is really important  as far as medium to long term perspective of nifty is concerned. If nifty opens gap down on Monday & maintains the gap throughout the week we can say that the uptrend has matured. Aggressive medium term traders can take short position at current level keeping 8970 as a stop.

Daily chart shows nifty is respecting the resistance trend line repeatedly. Last week also nifty reversed after touching the rising trend line. On downside, nifty has strong support zones around 8740 & beyond that 8520.  Nifty spent almost whole month of August in in the range of 8500 to 8740. SO it will be important to see how nifty trades around these zones. On the upside rising resistance line can still act as a strong resistance. Soshort term traders can take short position in nifty around 8950 keeping stop of 9025 for target of 8740. Or initiate short positions below 8690 for target of 8520 with a stop of 8750.

Tata Steel

Tatasteel has been extremely volatile stock in the past. It has outperformed the index in 2015 downtrend as well as the current upmove. The stock corrected more than 60% from its high of 575 made in July 2014 to low of  200 made in August 2015. The stock then consolidated for nearly 6 months in the range of 200 to 270 before breaking out in March 2016 to move nearly 80% from low of Aug. 2015 to 362 in April 2016.

Now if we look at the above chart, we can can see that Tatasteel has been consolidating above support zone of 310-315 for almost 2 months now. This 310-315 zone is a support turned resistance & resistance turned support zone as marked in the above chart by a horizontal lone. When a stock consolidates above support zone, it usually moves further up. So we can assume that Tatasteel is a good candidate to move higher.
Now where can the stock move? There is a strong resistance zone around 385 as marked in the chart by another horizontal line. The stock looks to be going to that resistance zone now or even higher towards 425. So we recommend going long in the stock with a medium term perspective for targets of 385 & 425 with a stop of 305 on daily closing basis. 

Weekly Nifty Update!

Last week, I mentioned that 7980-8040 is a strong support zone for nifty. As expected nifty moved towards the zone & then reversed from 8060 levels & gave weekly close of 8170.

As mentioned in the last report, nifty looks to be in short term correction. This correction can take form of a downtrend or a sideways trend. Resumption of uptrend towards 8390-8420 should start only if nifty closes above 8240. If nifty closes below 7980 we can say that this correction has taken a form of downtrend & should go towards 7790. 

For entire last week, nifty was trading in the range of 8060 to 8215. This indicates nifty might be in a sideways correction. Midways lying momentum indicator also supports the view. So unless nifty moves above 8240 or below 7980, buy near lows of the range or sell near highs of the range should be the strategy for the week.

Nifty update

In my last post I mentioned that break of 8045 should take nifty to 8150. Nifty not only reached 8150 but broke it & almost reached 8300.

Although the index reached almost 8300, it was not able to break 8300. in fact nifty gave consecutive 3 negative close from high of 8289. 

Currently nifty looks to be in short term correction. This correction likely to take nifty to 8040. 7990-8040 is a strong support zone for the index. Nifty had moved above this zone after 4 attempts. If nifty sustains above this zone it should move higher towards 8380-8420. Break below 7980 can take nifty to 7800. So bulls should keep 7980 a stop for their long positions & bears should keep 8040 as a target for their short positions. 

Wonderla Holidays

Wonderla (cmp 390) has been trading in a range for last 6 months after a rally of almost 150 pts earlier. Its 52 week high & low stands near 430 & 251 respectively.

After a big rally the stock is trading in a range. While doing that it has formed symmetrical triangle continuation chart pattern. The stock seems to be breaking out of the down trending upper trend line.
So it is  recommended to go long in the stock for a target of 450 with a stop of 370 on closing basis.

Is nifty heading towards 8100?

Last week nifty managed to protect 7650 & on Friday closed positively with a small candle. Today the index opened with a small gap & continued to to move higher & closed with a gain of nearly 135 points @ 7866.

Look at the the above chart. Its clear that nifty is making higher tops & higher bottoms since making a low on budget day. The low made on Friday is higher than the previous low of 7516.  Accordingly nifty should now make a higher high. So we can assume that 8000 will be taken out. Immediate resistance for nifty seems to be around 8045  where upper  Bollinger band is pegged. Breka of which should take nifty towards 8150 where 100 % extension of previous rally lies.

ABB likely to rise further!

ABB has been extremely volatile stock in last 3 years. The stock rose to 1525 from 430 in the 2014 rally & then corrected nearly 40% from the highs to 950 levels. Thus completing 50% retracement of the previous rally.
However ABB made a 52 week low of 952 on Jan 22,  well before nifty made its 52 week low on budget day indicating that the stock is outperforming the index & it looks like this outperformance will continue further. There are multiple resistances in the zone of 1225 to 1300. Once the stock crosses & closes above 1300, its likely to make a new high in next 12 months.
In the short term, the stock is trading above its 21 day HMA & making higher tops & higher bottoms.  Momentum indicators also supporting the view. So long positions can be initiated in the stock @ current levels for target of 1225 with a stop of 1115.

Triangular pattern in Asian Paints!

Asian Paints has outperformed nifty in last 5 years. The stock made a high around 920 levels in January 2015 & then corrected to 700 levels in March 2015. But bouned back sharply to to make all time high of 926 in August 2015.
Since then the stock has been trading in the zone of 770 to 910 for last 7 months. While nifty is trading almost 20% lower from its all time high Asianpaints is trading almost near to its all time high indicating solid strength in the stock. Although the stock hasn't moved higher but it has made significant higher lows forming a triangular chart pattern.  A triangular chart pattern in an uptrend is considered extremely bullish. It looks like the stock will break out from the triangular pattern soon & move higher towards 1050 levels.
So long positions can be initiated in Asianpaints @ current levels for targets of 1050 with a stop of 835 on closing basis.

Ashok Leyland

Just have a look at the Ashok Leyland weekly chart below. If you see prices 12 months ago, the stock has risen nearly 30% whereas index has fallen almost 20%. Easily the stock has outperformed the index. We expect this out performance to continue. Also for last 6 months, the stock is consolidating in the range of 80 to 95. The stock has formed solid base around 65 levels.as well. 

So I think this stock should be always on the radar. So short term traders can go long in the stock for target of 115 with a stop of 79. Long term investors can enter the stock for target of 250.