The market extended its northward journey for the fourth consecutive week ended August 12 and closed at fresh four-month high, driven by positive global cues with falling US inflation as well as India’s CPI inflation along with consistent FIIs buying.
The Nifty50 strongly respected its near-term support at 17,500 level, and rose 1.7 percent to settle the week at 17,698, the highest closing level since April 8.
With the recovery of more than 16 percent from June lows, the index is at crucial resistance area of 17,700-17,900, which fall within the long down sloping resistance line adjoining October 19, 2021 and January 18, 2022, as well as around previous swing high levels. The index may make a move towards these levels but then there could be a possibility of profit-booking with support at 17,500, experts said.
The broader markets also participated in an uptrend with the Nifty Midcap 100 and Smallcap 100 indices climbing 1.8 percent and 1 percent during the week.
“The falling trendline resistance of the previous swing highs is around 17,700-17,800 and we have ended right around the resistance end. In case the market surpasses this hurdle, then the 78.6 percent retracement of the previous correction is around 17,875. So, this entire 200-point range of 17,700-17,900 is a crucial hurdle for the index and the momentum readings are overbought,” Ruchit Jain, Lead Research at 5paisa, said.
He thinks that it is quite possible that markets would see a corrective phase again anytime soon. Traders should wait for a confirmation of any reversal before taking any contra trades, the expert advised.
The immediate support for the Nifty is placed around 17,630 and 17,500 and a close below the mentioned supports would be a sign of reversal.
Until then, Ruchit advised traders to adopt a stock-specific approach and lower the capital allocation in trading as the risk reward is getting unfavourable for fresh investments. Also, traders are advised to book timely profits and take some money off the table in the resistance zone.
Let’s take a look at the top 10 trading ideas by experts for the next three-four weeks. Returns are based on the August 12 closing prices:
Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities
InterGlobe Aviation: Buy | LTP: Rs 2,014.15 | Stop-Loss: Rs 1,900 | Target: Rs 2,250 | Return: 12 percent
The stock has formed a double bottom between Rs 1,550 and Rs 1,600 levels in March and July 2022. Technically, the stock has proven to form a double bottom by crossing the level of Rs 2,050.
Technically it is heading towards Rs 2,500 level in the next few months. The strategy for medium-term positional traders requires dip buying between Rs 2,000-1,950, with a stop-loss at Rs 1,900. Resistance will be Rs 2,150 and Rs 2,250.
PB Fintech: Buy | LTP: Rs 573.15 | Stop-Loss: Rs 520 | Target: Rs 690 | Return: 20 percent
Technically, since its listing the stock remained in a gradual decline, however, in the last few months the pace of the fall flatten, which is resulting in a positive divergence. It is an indication of the change in the prevailing trend.
It could bounce back to the equilibrium level of the last 8 months, which is around Rs 690. It’s a buy at current levels of Rs 580 and a balance buy at Rs 550 with a short-term to medium-term view. One can place a stop-loss at Rs 520.