The Nifty closed below its 20, 50, 100 and 200-days EMA support on Friday. Last week, Nifty formed a double top around 10,967 on a closing basis. The similar top was made earlier on Dec 19, 2018.
The double top formation is considered to be a bearish development technically and the view remains bearish unless the double top is taken out on a closing basis.
If we were to draw an upward sloping trend line adjoining the lows of October 26, 2018 (10,004) and December 11, 2018 (10,333), the breakdown is seen on the Nifty daily charts.
By breaching 10,692, Nifty has also formed a lower bottom on its daily charts. This level also coincides with the support provided by the previous bottom on the daily chart at 10,692 in Nifty.
Oscillators and indicators like RSI and MACD have also turned bearish on the daily charts. The immediate support for the Nifty is now seen at 10,335 while resistance for the same is shifted towards 10,800-10,900 zone on the upside.
The momentum which was lacking for the last 2 months in the Nifty now seems to have emerged and the direction of the momentum is on the bearish side.
The recent move in the index indicates chances of a sharp move in the short term and considering the same, options traders could execute long strangle by buying 10,400 Feb PUT and 10,800 Feb Call simultaneously in the Nifty.
To conclude, Nifty has breached crucial support of 10,692 and is now heading for the downside target of 10,335. Traders should remain bearish with a stop loss of 10,900 on a closing basis.
Here is a list of top three stocks which could give 8-11% return in next 1 month:
Wipro: Buy| LTP: Rs 355| Target: Rs 385| Stop-Loss: Rs 335| Return 8%
The stock has recently registered a new 52-week high with higher volumes. IT sector has been outperforming for the last one month. The stock has already posted its quarterly results which were good.
The stock has broken out from its bullish “Cup and handle” pattern on the weekly charts. It is now trading above all important moving averages, indicating uptrend on all time frames.
Considering the technical evidence discussed above, we recommend buying the stock between CMP and 340 for the target of 390 and keep a stop loss at 335 on a closing basis.
Engineers India: Sell| LTP: Rs 114| Target: Rs 102| Stop-Loss: Rs 122 | Downside 11%
The stock price has breached the crucial support of upward sloping trendline on the daily charts. It failed to surpass the crucial resistance of its 200-DMA during this month and turned south.
The short-term moving averages have crossed medium-term moving averages on the downside, indicating a weak trend.
Indicators like MACD and ADX also turned bearish on the short term charts. Considering the technical evidence discussed above, we recommend selling the stock at CMP and average it at 118, for the target of 102, and keep a stop loss at 122 on a closing basis.
Eicher Motors: Sell| LTP: Rs 19,900| Target: Rs 18,400| Stop-Loss: Rs 21,000 | Downside 8%
The auto sector has been underperforming for the last couple of months. The Nifty Auto index is on the verge of giving the lowest monthly close since March 2016.
Eicher Motor has been the weakest stock amongst all the large-cap auto stocks in the last two months. It is trading below all important moving averages, indicating a bearish trend on all time frames.
The stock has been forming lower tops and lower bottoms on the weekly charts. Considering the technical evidence discussed above, we recommend selling the stock between CMP and 20500 for the target of 18400, and keep a stop loss at 21000 on a closing basis.
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Source: Moneycontrol
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