Not the time to short the Nifty; 6K is the new floor

Special to Firstpost

CNX Nifty (6,094.75) : The upward march in the Nifty continues unabated and there are no signs of any weakness as yet.The momentum behind the rally has taken quite a few participants by surprise. The trailing stop-loss mentioned in prior weeks for existing long positions remains unchallenged. This would have ensured that early entrants are still coasting along with the trend.

The revised trailing stop-loss for long positions may now be pushed to 6,010, based on spot price. Nifty is currently trading at levels where there is no technical justification to consider fresh long or short positions. Unless the Nifty falls below the 6,000 mark, there is no reason to even consider short positions.[caption id=“attachment_772519” align=“alignleft” width=“380”] Intent on stocks. Reuters[/caption]

Given this backdrop, it makes sense to sit tight with the existing long positions with a trailing stop-loss to protect unrealised gains. Long positions may be considered in select stocks where the risk-reward metric is favourable.

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Stocks such as Shriram Transport Finance, Bata India, United Spirits, and Amara Raja Batteries come across as top picks for inclusion in the portfolio. MRF and TCS also qualify as candidates that may be accumulated on weakness.

Bank Index (12,752.30): Unlike the Nifty, the bank index remained range-bound and is yet to clear the key resistance at the 13,000-mark. The minor swing low at 12,188 is now the reference point for the bullish camp.

A fall below 12,188 would be an early sign that the short-term trend has turned bearish. The index could the slide to the next support at 11,550. Those holding long positions in the index may have a stop- loss at 12,100. There isn’t any compelling reason to look for any trading bet at the prevailing levels. The price has to provide further clues to indicate the direction of the next big swing.

Bata India (Rs 804.55): The stock has been in a steady downward correction off the major high of Rs 990 recorded in October 2012. The price action in the past few days indicates that the short-term trend is bullish and the stock could rally to the immediate resistance at Rs 865.

Investors may buy the stock on weakness, with a stop-loss at Rs 740, for an initial target of Rs 865. A move past Rs 865 would be a sign of strength and could help the stock progress to the next target at Rs 910.

** Atul (Rs 354.1) :**The recent chart patterns suggest that the stock has completed its downward correction from the high of Rs 472 recorded in December 2012. The sequence of higher highs and higher lows recorded off the 26 March low of Rs 287 indicates that a short-term uptrend is underway.

Long positions may be considered in Atul, with a stop-loss at Rs 329, for a target of Rs 435. Those willing to play the waiting game may get opportunities to exit at Rs 471.

(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.)