Nifty, Bank Index are ready for some major moves

Special to Firstpost

S&P CNX Nifty (5,908.35): It was yet another week of range-bound action for the Nifty in the week-ended 28 December. The bullish and bearish trigger levels of 5,966 and 5,838 remains intact and a break of either of these levels would determine the next major move.

While a fall below 5,838 would indicate that the index is still in a downward correction phase, a breakout past 5,966 would suggest that the move towards the major target of 6,200 is underway. See chart here

[caption id=“attachment_572390” align=“alignleft” width=“380”]  It would only indicate that a deeper correction is in progress that could push the index to 5,700-5,720. Reuters[/caption]

Even if the index were to fall below 5,838, it would neither invalidate the medium-term bullish view nor would it affect the chances of a rally to 6,200. It would only indicate that a deeper correction is in progress that could push the index to 5,700-5,720.

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As observed last week, as long as the index trades below 5,966, it would be safe to work on the premise that a test of the support at 5,700 is on the cards. Considering the medium-term bullish view, investors may buy frontline stocks from the public sector banking sector.

Stocks such as Larsen & Toubro, Allahabad Bank, Steel Authority and HDIL are names that might top the buying-list in the event of a a deeper correction.

CNX Bank Index (12,458.15): The price action in this index was not too different from the Nifty during the week gone by. The truncated trading week along with the drop in overall trading volumes seems to have contributed to the lacklustre trading activity in this index.

Similar to the Nifty, this index too is trading within its bullish and bearish trigger levels of 12,575 and 12,197 respectively. A breakout past 12,575 would trigger a rally to the 12,950-13,100 range. The medium-term uptrend would be under threat only if the index were to fall below 11,120.

There has been a perceptible drop in volatility in this index, which typically is a precursor to a big move. The recent price action suggests that the index is taking a breather before embarking on the next major move. As highlighted in prior weeks, stocks from the public sector banking space appear better placed to deliver superior returns in comparison to the ones from the private sector.

Havells India (Rs 638.40): This stock has been in an uptrend in the past few weeks, which is evident from the series of higher highs and higher lows recorded since 30 November. The short-term outlook is bullish and a rally to the immediate resistance at Rs 680 appears likely. See chart here

Investors may buy this stock with a stop-loss at Rs 595, for a target of Rs 680. The uptrend would gain momentum on a breakout past Rs .680 and the stock could then rally to the major target of Rs 750.

Jyothy Laboratories (Rs 163.95): The stock has been in a downward correction in the past several weeks. This correction appears complete if the price action in the past few days is any indication. The sharp reversal witnessed on Friday is a sign that buyers getting active.

The stock may be bought with a stop-loss at Rs 148, for a target of Rs 186. Those who are patient may get opportunities to exit at Rs 205.

(The views and recommendations featured in this column are based on a 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.)