Expect a pull-back rally; go short on RIL & long on Bharti

Special to Firstpost

Investors and traders are usually guilty of trading early owing to the fear of missing out a potential move. The market always gives clues, be it a reversal or continuation. Hence, there is no reason to put money at risk by attempting long positions in expectation of a reversal.

S&P CNX Nifty (4,710.05): The anticipated pull-back rally did not materialise and the index slid below the prior swing low of 4,720, which is a sign of weakness. The index now has to move above the recent swing high of 5,400 to indicate reversal of the medium-term downtrend.

While there is still a case for a minor pull-back rally, it would make sense to use such a rally to pare exposures. The immediate resistance for the index is at 4,770, followed by the major resistance at 4,880.

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CNX Bank Index (8,488.60): There is no change in the view expressed last week. The index is likely to see a pull-back rally, which does not alter the medium-term bearish view. The immediate resistance is at 8.900-mark.

A breakout past 10,100 is required to indicate reversal of the medium-term downtrend. Else, a drift down to the major support at 8,100 would be the preferred view.

Reliance Indsutries (Rs.754): This stock has played a key role in pulling down the benchmark indices in the past few weeks. The short-term trend remains bearish and a fall to the immediate support at Rs 715 appears likely.

Short positions may be considered with a stop loss at Rs 810, for a target of Rs 715. A fall below Rs 700 would lend momentum to the downtrend and could trigger a slide to the crucial support at Rs 620.

Unless the stock rallies past Rs 900, there would be a strong case for a slide to the major support level at Rs 620.

Bharti Airtel (Rs.374.90): The short-term outlook for the stock is bullish and a rally to the minor resistance at Rs 395 appears likely. A breakout past Rs 395 would lend momentum to the uptrend and could trigger a rally to the major resistance at Rs.420.

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Long positions may be considered on weakness, with a stop loss at Rs 340, for a target price of Rs 395.

(The views and recommendations featured in this column are based on the technical analysis of historical price action. There is a risk of loss in trading. The author may have positions and trading interest in the instruments featured in the column.)