Technical View: Nifty forms a ‘Long Legged Doji’ on weekly charts; 10,818 crucial for bulls

A typical long-legged Doji pattern is formed when the opening price is almost equal to the closing price but there was a lot of intraday movement on either side.

 

The Nifty50 which opened with a gap down managed to recoup a majority of its losses and closed flat with slight negative bias on Friday. It made a bullish candle on the daily charts on an intraday basis and a ‘Long Legged Doji’ kind of pattern on the weekly charts.

A typical long-legged Doji pattern is formed when the opening price is almost equal to the closing price but there was a lot of intraday movement on either side.

The Nifty50 opened the week at 10,765.95 on Monday and closed at 10,767 on Friday. But, it hit a low of 10,633.15 on 5 June and a high of 10,818 on Thursday.

For Friday, Nifty index opened negative but managed to hold on to its immediate support of 10,700 – 10,720 zones and recovered towards its crucial hurdle of 10,770-10,780 zones.

Technical experts advise investors to remain cautious as bulls failed to reclaim crucial resistance levels even after strong rally seen in two back-to-back trading sessions. It is crucial for bulls to reclaim 10,818 levels which was the intraday high of Thursday for the momentum to continue.

On the weekly charts, it looks that it is slowly inching up as it registered a third consecutive positive close before signing off the week with a ‘Long Legged Doji’ kind of candlestick formation suggesting indecisive nature of bulls.

Hence, it is critical for Nifty50 to register a fresh breakout above recent highs of 10,818 levels so that bulls can confidently march ahead else they continue to remain vulnerable to a counterattack by the bears at any time.

Mohammad further added that Thursday’s gap-up opening in the zone of 10,722 – 10,698 appears to be in a critical support and a breach of which could enhance selling pressure, but for now, traders are advised to remain cautiously optimistic till a directional move unfolds going forward.

India VIX fell down by 0.65 percent at 12.69 levels. On the options front, maximum Put OI is placed at 10,600 followed by 10,500 strikes while maximum Call OI is placed at 11,000 followed by 10,800 strikes.

Put writing was seen at 10,600 and 10,700 strikes while Call writing was seen at 11,000 and then towards 10,700 strikes. “Options data suggests a broader trading range in between 10650 to 10850 zones for next coming sessions.

The Nifty closed flattish by forming a small bullish candle on the daily scale while on the weekly basis it formed a high wave long legged Doji Candle. The price set up suggests that decline is being bought while follow up is missing at a higher level to hold beyond 10,770 zones on closing basis.

The index needs to hold above 10,770 zones to extend its positive movement towards 10,888 and then towards 10,929 while on the downside supports are seen at 10,720 and then towards 10,660 levels.

MORE WILL UPDATE SOON!!

Time to go short? Risk reward is attractive to create short positions on Nifty

Risk-reward ratio at this level is quite attractive to create short positions, and on the downside, 10,417-10,300 levels will be the targets to watch out for.

 

The Nifty, in the week gone by, witnessed sharp swings in both the directions and ultimately posted a third consecutive weekly positive close. The detailed structure i.e. the daily chart shows that the price action over these three weeks is showing the characteristic of a pullback.

This means that the move is unlikely to develop into a larger rally. A higher time frame, i.e. the monthly chart reveals that the Nifty formed a Doji pattern for the month of May. A Doji is a sign of exhaustion in the market.

Thus, we are likely to witness a correction unless high of the Doji pattern i.e. 10,929 gets taken out. The risk-reward ratio at this level is quite attractive to create short positions. On the downside, 10,417-10,300 will be the targets to watch out for.

The market breadth has been weak for quite some time. A number of stocks, especially from the broader market, are in a downtrend from short term as well as long-term perspective.

One should definitely stay away from these stocks and those who are still holding on to these tumblers should be looking to get rid of them.

There is a huge divergence between the Nifty and the mid and small cap indices. The Nifty is still hanging on above its crucial short term and medium term moving averages whereas the mid & small cap indices are way below the respective averages.

They have even breached their March lows. Clearly, there is a weakness in this space. In terms of wave structure, these indices are forming a complex correction and the bounce over the last couple of sessions is a part of the larger decline. Thus, one should use this bounce as an opportunity to exit.

Positional calls which could give handsome returns to investors in the next 1 month?

ICICI Bank Fut: Sell| Stop loss: Rs 302 | Target Rs 255| Return 11.4%

Ashok Leyland Fut: Sell| Stop loss: Rs 152| Target Rs 132| Return 8.9%

Mindtree: Buy| Stop loss: Rs 982| Target: Rs 1,120| Return 9%

MORE WILL UPDATE SOON!!

Global brokerages bet on these 10 mid & smallcaps that could return 16-71%

In terms of returns, the BSE Midcap and Smallcap indices saw a cut of 11 percent and over 14 percent so far in 2018, compared to an over 1 percent return in the Sensex.

  

Mid and smallcap stocks that provided handsome returns in 2017 lost some sheen in 2018 as investors lost over Rs 6 lakh crore. Aggregate market capitalisation of the BSE Smallcap and Midcap indices slipped Rs 4.6 lakh crore and Rs 1.7 lakh crore, respectively.

In terms of returns, the BSE Midcap and Smallcap indices saw a cut of 11 percent and over 14 percent so far in 2018, compared to an over 1 percent return in the Sensex.

Stocks in the midcap space that lost the most in 2018 include: Reliance Communications, Adani Power, Bank of India, Union Bank of India, Ajanta Pharma and Bharat Electronics. The same in the smallcap space include: Vakrangee, Gitanjali Gems, SRS, Electrosteel Steels, Orient Paper & Industries.

 

A number of factors - resignation of auditors, Securities and Exchange Board of India reclassification of mutual fund schemes and BSE’s surveillance mechanism on over 100 stocks - are weighing on BSE Mid and Smallcap stocks. Apart from that, high valuations, relentless selling by foreign institutional investors and failure of earnings to catch up are some of the key factors that led to a sharp correction in the mid and smallcap space.

The bull phase of CY17 provided an impetus for broader shares under the small and midcap segment to generate staggering returns for investors. Riding on this euphoria, many smallcap stocks that rose up to 174 percent or more recently came under selling pressure.

Mismatch between valuations and fundamentals as prime reason for the sell-off as earnings were not able to justify the valuation level’.It was also partially aided by SEBI’s reclassification of mutual fund schemes which played a role in price correction through a churning.

Correction in broader market further led to a margin call on scrips, thus denting overall market sentiment, which translated into further selling.

Going forward, investors will be better off investing in companies from the small & midcap space that are displaying earnings visibility and growth momentum.

Here is a list of ten mid- and smallcap stocks from various global brokerage firms that can return 16-71 percent in the next one year:

JSPL: Buy| Target: Rs 401| LTP: Rs 234.65| Return 71%

Citigroup maintain a buy rating on JSPL with a 12-month target of Rs 401. The steel business is doing well in Q1FY19. The Angul plant is ramping up fast which is a positive sign for the company. The Direct-reduced iron (DRI), also called sponge iron plant is likely to start in July 2018.

Coal supply situation has improved, and the company is now looking to sign short-term PPAs, said the report. Valuation with improving cash flows and EBITDA appear quite attractive.

HEG and Graphite India:

Jefferies maintain buy on HEG and Graphite India which have risen sharply in the last one year. The global investment bank has a buy rating on HEG with a target of Rs 4,400 which translates into a return of 38 percent. For Graphite, the target is set at 1275, which translates into gains of nearly 60 percent.

The demand supply tightness continues which led to higher realisations. New contracts are signed at higher prices hinting strong Q1FY19, said the global investment bank.

Jefferies remains positive on Graphite electrode sector. Both HEG and Graphite are trading at cheap valuations providing good buying opportunity to buy.

Apollo Hospitals: Buy| Target: Rs 1500| LTP: Rs 930| Return 61%

CLSA maintains a buy recommendations on Apollo Hospitals with a target price of Rs 1,500. Execution is key in FY19 for Apollo Hospitals. CLSA expects Apollo to achieve 20 percent EBITDA growth. New hospitals are also witnessing good traction.

Thermax: Buy| Target: Rs 1,350| LTP: Rs 1129| Return 20%

Deutsche Bank maintains a buy call on Thermax with a 12-month target price of Rs 1,350. The company has decided to enter new segments to devolatilise revenue.

The company is also looking to enter into process cooling, commercial sector, rooftop solar, and industrial segment. It also plans to expand rooftop solar biz to developed markets after 18-24 months.

Torrent Pharma: Buy| Target: Rs 1,610| LTP: 1,388| Return 16%

CLSA maintains a buy rating on Torrent Pharma with a target price of Rs 1,610. Strengthening of India franchise keeps us positive despite EPS cut.

The global investment bank expects to gain steam in FY19 along with its synergy with Unichem. It looks like the US sales have bottomed out, and Europe is holding strong while Brazil faces headwinds in FY19.The global investment bank retains revenue and Ebitda estimates for FY19-20CL.

Dish TV: Buy| Target: Rs 100| LTP: Rs 72.70| Return 39%

CLSA maintains a buy rating on Dish TV with a target price of Rs 100. The management reiterated merger synergy of Rs 5 billion in FY19. The global

investment bank sees 10 percent Ebitda Cagr over FY19-21 CL. However, ongoing open offer caps downside risk.

Prestige Estate: Buy| Target: 325| LTP: Rs 233.85| Return 40%

Citigroup maintains a buy rating on Prestige Estates with a target price of Rs 325. The new launches is likely to keep pace of sales going and boost revenues.

ESCORTS: Buy| Target: Rs 1,150| LTP: Rs 898.80| Return 28%

HSBC maintains a buy rating on Escorts with a 12-month target price of Rs 1,150. The growth momentum remains intact. The margins are likely to improve across all businesses, said the globel investment bank. Increasing captive financing is a key positive for Escorts.

NCC: Buy| Target: Rs 160| LTP: Rs 107.55| Return 49%

CLSA maintains a buy recommendation on NCC with a 12-month target price of Rs 160. The global investment bank sees several years of growth visibility. It has forecasted a 20 percent EPS CAGR over FY18-20. The guidance is robust with co expecting 45 percent topline growth in FY19.

MORE WILL UPDATE SOON!!