Nifty: Nifty could encounter more selling pressure: Analysts


The outcome of the US Federal Reserve’s monetary policy meeting on Wednesday could decide the short-term direction of the markets. While the US central bank is expected to raise its key policy rate by 50 basis points, investors will watch out for chairman Jerome Powell’s comments on inflation.

Consumer inflation in the US has remained elevated at 7.7% in October and job growth has also not slowed down yet, raising concerns Powell might signal a prolonged period of tightening. The US consumer inflation reading for November is due on Tuesday. The Nifty has slid to 18,497 on Friday after hitting a record high of 18,887 on December 1 with technical indicators pointing to more weakness in the near term.

Analysts say traders will cut bullish bets if the Nifty falls below 18,100 levels. Traders could take bullish bets on Asian Paints, HDFC Bank,

, and , said analysts.



Where is Nifty headed this week?

A mixed trend across sectors has been capping the damage to the index so far. Besides, the recent improvement in the participation of broader indices, viz. midcap and smallcap, further adds to the opportunities for traders amid the corrective phase. We expect further consolidation in the index; however, a breakdown of 18,300 in Nifty could broaden the range, with the next crucial support at 18,000. To regain strength and inch towards the next milestone of 19,000, it should decisively reclaim the 18,750.

What should investors do?

We recommend focusing on stocks based on the sectoral trend. We expect the positive tone to continue in banking and FMCG sectors while pharma and IT stocks may continue to trade lackluster. Besides, it’s prudent to keep the leveraged positions hedged, especially overnight trades, citing the upcoming data and events and staying selective on the broader front. Among the list of stocks, traders may consider , , Colgate Palmolive, and Hindustan Unilever for long trades. On the flip side, Biocon, Dixon, and are some of the stocks which look weak on the charts.



Where is the Nifty headed this week?

A long negative candle was formed on the daily chart with a minor lower shadow. Technically, this pattern indicates a downside breakout of the range-bound movement of the last few sessions. This is not a good sign and points towards more weakness in the short term. Nifty formed a reasonable negative candle on weekly chart, which was placed beside the long bull candle of the previous week. This signals that the market is now preparing for more weakness, and the next lower levels to watch will be around 18,150-18,100 for the next 1-2 weeks.

What should an investor do?

Having moved below the crucial supports, the market is expected to give some shorting opportunities. It is hereby advised to book profit in existing long positions or place strict stop loss while trading longs. One may also hedge the portfolio by creating near-term short positions in the index and selective stocks. In December, the short positions in Nifty and Bank Nifty will be placed with stop losses of 18,780 and 44,250, respectively. Stocks with Negative bias:

, TCS, , SAIL, , Maruti, DLF, M&MFIN, and .



Where is Nifty headed this week?

The Nifty has formed a bearish engulfing candle on daily and a bearish candle on weekly frames. Now, the index has to hold the key support of 18,380 zones which is a 23.60% retracement of the entire up-move from 16,747 to a recent high of 18,887. The index is making lower top – lower bottom on a lower time frame and needs to negate the same with a hold of 18,380 zones to extend the move towards 18,666, then 18,750 zones, whereas supports are placed at 18,300 and 18,200 zones. Bank Nifty has to hold its key support of 43,339 zones for an up-move towards 44,000 zones, whereas key support is placed at 43,000 zones.

What should investors do?

Options traders can initiate a Bull Call Ladder Spread in Nifty by buying the 18,500 Calls and selling the 18,650 Calls and 18,700 Calls with the view that dips could be bought and the upside is going to be capped for the time being. Stock-specific, investors and traders can remain bullish in HDFC Bank, HDFC, SBI, Colgate,

, , , Siemens, and . Options traders can initiate a Bull Call Spread in Bank Nifty by buying 43,500 Calls and selling a 44,000 Calls with the view that dips could be bought for momentum towards 44,000 zones in the banking index.



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