Nifty could see a pause with support at 21,680: Analysts

Technical charts and FIIs’ net short position of 65% indicate that markets could undergo either a timewise corrective phase or a price-wise correction. Technical analysts suggest 21,680 would serve as a support for Nifty on a closing basis, and a close below this level could lead to a correction towards 21,450-21,400. ACC, Apollo Hospitals, Bharat Forge, SBI, Bank of Baroda, Hero Motocorp, Sun Pharma, Cipla, and TCS, among others, have formed bullish patterns on the charts, according to analysts.



Where is Nifty headed?

Nifty had resisted twice around 22,127 and is yet to surpass that hurdle where a trend reversal candlestick pattern was formed. The index has not yet negated the pattern, and negative RSI divergence is also visible in the midcap Index. FIIs are net short with 65% positions on the short side. The market could go through either a time-wise or a price-wise correction. The 20-day EMA is around 21,680, which would be seen as support on a closing basis. A close below this could result in a correction towards 21,450-21,400. The index needs to surpass the recent swing high of 22,127 to negate the reversal pattern, which would then result in a continuation of the uptrend.

What should investors do?

Traders are advised to stay cautious and avoid aggressive longs until we see a breakout beyond the above-mentioned range. Trading on stock-specific momentum could be a better approach. Stocks such as ACC, Apollo Hospitals, and Bharat Forge have bullish structures; while Polycab and GNFC have bearish chart structures.



Where is the Nifty headed?

The positive news is that S&P VIX and brent oil have cooled down. Week-on-week Nifty cumulative open interest (COI) remained flat, while Bank Nifty COI jumped 10.6%. Friday’s session saw some short covering in both index futures. The options chain is suggesting a range of 21,500 to 22,000 for the weekly expiry; however, the monthly series is showing concentration at the 21,000 strike, and 22,000 on the upside. Caution is advised on leveraged longs in midcaps and smallcaps. The weekly view is range-bound. It’s best to play individual stocks. Bullish Zone: Above 22,050; Bearish: Below 21,500.

What can investors do?

Look to trade individual stocks until Nifty gives a clear breakout. Buy Bharat Forge at Rs 1,282; stop loss at Rs 1,268 for a upside of 5-6%. ACC can move towards Rs 2,600- plus; stop loss at Rs 2,550. The bounce-back in ICICI Pru Life gives a good shorting opportunity. Breakdown in Bajaj Finserve on the daily chart below Rs 1,560 can push the stock lower to Rs 1,500.



Where is the Nifty heading?

Nifty shifted into a sustainable upside bounce from the lows on Friday and closed with a modest gain. A smallbody positive candle was formed on the daily chart with a minor lower shadow, which indicates emergence of buying at the lower support. The market remained in a pattern of a one-day decline, and upside bounces in the subsequent days. Nifty is currently placed at the key support of the uptrend line around 21,550-21,600 levels. Positive chart patterns like higher tops and bottoms are intact, and Friday’s low of 21,630 could be considered as a new higher bottom. Hence, the overall uptrend status of the Nifty remains intact, and there is a possibility of further upside.

What should investors do?

One may continue to create fresh long positions in the Nifty towards the upside target of 22,000-22,100. Any dips down to 21,600-21,550 could be a buying opportunity. The long positions need to be placed with a stop loss at 21,500. Stocks with positive bias include SBI, Bank of Baroda, Bharat Forge, Hero Motocorp, Sun Pharma, Cipla, TCS, Mphasis, Indiabulls Real Estate and DLF.

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Harry Byrne

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