Nifty could head lower next week; Wipro, Bhel could slide

Special to Firstpost

CNX Nifty (5,833.20): Except for a sharp cut on Monday, the Nifty did a whole lot of nothing during the week gone by. The key support for the index is at 5,770-5,800 range. A break below support range would have bearish connotations and the index could then slide to 5,350-5,400.

[caption id=“attachment_1139157” align=“alignleft” width=“380”]  More fall in the markets? Reuters[/caption]

As long as the Nifty stays below the key resistance at 6,050-6,100 range, there would be a strong case for a slide to the minimum downside target of 5,350-5,400. A look at the index constituents such as BHEL, Tata Steel, Infosys, IDFC, Kotak Bank and Asian Paints strengthens the case for a potential downtrend in the Nifty.

While the indications are that the index could seek lower levels, it would be safer to await confirmation from the price, in the form of a drop below support at 5,770. The IT sector too is displaying signs of fatigue after the recent run-up in price.

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CNX Bank Index (9,899.75): This index acted as a key force behind the 3 percent fall that the Nifty witnessed this week. The bearish sequence of lower highs and lower lows since May 20 is still intact and the breach of the support at 10,300 (mentioned last week) confirms the bearish undertone. .

Unless the index moves above the recent swing high at 11,300, there would be a strong case for a test of the support at 8,900. Any recovery would be an opportunity to short the bank index with a stop above 11,300 for a target of 8,900, basis spot price.

Wipro (Rs.474): The stocks from the IT sector have been top performers in 2013 and this stock is no exception. The rally in this stock was however halted at the resistance at Rs.500 and the recent struggle near this resistance suggests that there could be technical distribution of inventory by buyers holding profit positions.

The short-term outlook is bearish and the stock could slide to the support at Rs.425-430. Shareholders may reduce exposures by taking profits while traders may short the stock at higher levels, with a stop loss at Rs 505 and target of Rs 430.

BHEL (Rs.142.30): This stock has been one of the big gainers of this month. The rally has pushed the stock to the resistance at Rs 152-155 range. The stock could seek lower levels and a test of the support at Rs 128-130 appears likely.

Those having long positions may reduce exposures. Short-term aggressive traders may consider short positions at higher levels, with a stop loss at Rs 154 and target of Rs 128. A fall below Rs 128 could lend momentum to the downtrend and the stock could then slide to the major support at Rs 115-120.

(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.)