If you are getting ready for next week trading, Jay Thakkar of Anand Rathi pitches a few ideas. The NSE Nifty is very very near its short term bottom, he told ETNow during an interview.
Edited excerpts:
ETNow: What is the screen telling you, the fact that we have just barely managed to scratch the surface at the 10k mark, defended somehow after what looked like it is going to be a breach and 10,000 as well would be taken in. What is it telling you about what lies ahead of us? Looks like it is just a matter of days we are going to see a reality sub-10k?
Jay Thakkar: Yes, absolutely correct. Today, somehow the Nifty managed to hold the levels of 10,000. But then yes, I think more or less we are very very near to the short term bottom. Amid the this overall fall, which we have seen in the markets in the past two months right from 11,750 approximately till recent lows, somewhere we are completing the initial leg of the downtrend. This is just the first leg down from where the momentum indicators have really reversed from quite an overbought territory to oversold territory and that generally happens when the overall trend reverses.
So no doubt that in the medium term, the trend is reversed. For the short term, I would say we have been seeing some divergence happening in the market on most of the indicators, which clearly indicates that the index is somehow nearing the short term bottom and from these levels, I think the risk reward is definitely good on the long side. I think for this November series, it is quite likely that we will see a positive monthly close.
On the lower side I would say 9,800-9,850 is a very crucial support, which is just 1-1.5 per cent from the current levels. But on the upside, I think that in this series itself, we might see a bounceback of almost 4-5 per cent. So if you see the risk reward, it is definitely favouring the short-term bulls from these levels.
ETNow: We wanted your sense on what is happening with Yes Bank? What is it that you are seeing on the charts?
Jay Thakkar: As you rightly said a smart recovery is seen on Yes Bank and we saw a bounce at least coming till its previous gap area of almost 270-odd levels. But then, we have again seen shorting happening in that stock, again a downtrend continuing from those levels, which clearly indicates that overall trend for Yes Bank is still negative. We have not seen that kind of a reversal which we are seeing majorly happening in most of the indices.
In fact, the banking pack is one area wherein lately we have seen some shorts getting accumulated and for the past couple of sessions, banking was one sector which had been in fact deviating or I would say giving a positive divergence as far as the Nifty was concerned.
But then, banking stocks have started to fall again… the pain will be seen in the banking names only. On the lower side, around 150 is a very crucial support as far as the medium term trend is concerned for Yes Bank. Till those levels are held I think the possibility of a bounceback is also likely, along with the entire market. But yes, 150 is the level to watch out for on Yes Bank.
ETNow: What are some trades for Monday morning?
Jay Thakkar: As I said I am expecting that markets should bottom somewhere around these levels and not more than 1-1.5 per cent on the lower side but on the upside, we have a great bounceback possibility. Keeping that in mind, I have some long ideas. So, first would be a buy on Maruti, the reason for that is we have clearly seen a declining structure on the weekly charts. The stock has really retraced 38.2 per cent of its previous move right from 1,000 to 10,000. It has clearly shown a positive divergence on daily as well as hourly charts.
At these levels if someone buys, at least for this entire series, I think one can see the levels of almost 7,250-7,300 on the upside, placing a stop loss at around 6,550. Maruti is definitely a positional buy.
Second buy recommendation would be on Granules. With a positive close and the kind of recovery it saw, Granules has formed a double bottom pattern on the daily charts. With that, on the lower side now, 89 is a very crucial support on a closing basis. Till we do not see a close below 89, the possibility of this stock inching towards the levels of 102 at least in a weeks time or so is quite high. So Granules is also a buy.
These are the two buy recommendation which I have.
On the short side, I would say as far as the pharma names are concerned, I would say Aurobindo Pharma and Cipla are the two short ideas because Cipla has clearly broken down from a bearish head and shoulders pattern. Hence, the short term target for the same comes to 595-585. One can sell this with a stop loss of 615. Aurobindo Pharma has clearly broken down from a symmetrical triangle pattern that has been formed on the daily charts. The wave seen on the lower side has ensued and in that I think Aurobindo Pharma is likely to head towards the short term target of 689. So one can sell this with a stop loss of 745. So Auro and Cipla are shorts whereas Maruti and Granules are long.
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