'Expect rupee to remain strong next week; bearish on the IT sector'

Manali Bhatia

Nifty failed to hold on to the opening gains on March 22 and the last week closed with the marginal gain of a quarter percent on a weekly basis. After touching the highest point of the week, the index witnessed mild profit booking on March 22 and small "Doji" candlestick pattern emerged on the weekly chart. The pattern suggests mild profit booking could continue in the upcoming week but considering the overall structure, any dip will provide a decent buying opportunity to the bulls.

Taking the retracement theory into perspective, recently Nifty has given breakout from the consolidation zone and has also breached the 61.8 percent retracement level of September -October fall (from 11,760 to 10,004.55) that indicates that we are heading towards 11,760 again in days to come.

Recently, we have seen almost 1,000 points sharp rally in Nifty in just 22 trading sessions and mild corrections are obvious process after such up move. The immediate support for the market now exists at 11,180 i.e. 38.2 percent retracement level of the latest sharp up move. Apart from this, "rising window" pattern is also likely to act as important support at the same level. On the other hand, 11,621 will act as a resistance in days to come that if trades on higher side could result in new highs.

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For Nifty options, we have observed 11,600 Call option has remained the most comfortable strike price of call writers and will continue to act as a hurdle in the coming week. The band signifies the trading range of 11,200-11,600.

Moreover, the rupee is becoming stronger and expected to remain so in the next week as well. Therefore, we remain bearish on the IT sector.

Here are four stock recommendations: 

Bata India | Rating: Buy | CMP: Rs 1,361.65 | Target: Rs 1,455 | Stop loss: Rs 1,329 | Return: 7 percent

The stock is trading in a bullish zone on a weekly and monthly time frame. On the daily chart, the counter is going through a phase of consolidation after a massive upmove.

RSI on the daily chart shows positive reverse divergence at important support level suggesting up move is likely to continue again in coming days. Also, the stock is taking support at 20-Day Moving average and momentum indicators on hourly charts are trading in bullish zone. Hence, the stock can be bought for the short-term gain.

Maruti Suzuki | Rating: Sell | CMP: Rs 6,578.9 | Target: Rs 6,250 | Stop loss: Rs 6,750 | Return: 5 percent

The stock has been trading in a range for the last two months and now breaking out of it. After trading at 20-week moving average for couple of weeks, the big red candle indicates the momentum is building up on the downside. The prices are tagging below lower Bollinger Band and the stock is trading below all major moving averages and providing the short-term trading opportunity to the traders.

Sun Pharma | Rating: Buy | CMP: Rs 473.25 | Target: Rs 510 | Stop loss: Rs 450 | Return: 8 percent

The stock is showing a sign of reversal on the monthly chart. After forming a "Doji" candlestick pattern, the upward momentum has started. On the daily chart, there is positive crossover of important short term moving averages ribbon and medium term moving averages. ADX is trading at the level of 26 suggesting trend is building up in the counter and can be bought for short-term gain.

Ambuja Cements | Rating: Buy | CMP: Rs 229.85 | Target: Rs 245 | Stop loss: Rs 220 | Return: 7 percent

The stock has given breakout from a falling trend line on the weekly chart and started trading above 20-week moving average after almost a year. On daily chart, the stock has retreated to the support level after triangle breakout and now again is showing a sign of life. RSI is bouncing back from the important support level and rising ADX at 25 level suggests trend is building up in the counter. Thus long positions can be initiated in the counter for short-term gain.

The author is a Senior Research Analyst at Rudra Shares & Stock Brokers.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are his own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. First Published on Mar 24, 2019 03:56 pm