Stock picks by Sameet Chavan: Buy Asian Paints, JSW Energy

Nifty Outlook

The sharp recovery on March 19 was followed by a flat to positive start on Monday, owing to favourable global cues. The lead extended on the following session after the Supreme Court’s verdict on Loan Moratorium. However, as we alluded to in the intra-week commentary, the conviction was clearly lacking in the up move, which eventually resulted in a sharp decline thereafter. Due to mid-week sell off, the Nifty went on to enter sub-14,300 territory for the first time after the Budget session. However, this Friday, too, brought some positivity back in to the market as we witnessed a decent recovery across the board to reclaim the 14,500 on a weekly closing basis.

After the recent consolidation, the market finally started feeling some heat as we witnessed in the week gone by. Fortunately, we remained a bit adamant and did not get carried away by the in-between upswings. We continue to remain cautious and the way we are placed on the charts, further correction cannot be ruled out. As far as levels are concerned, the next key support is visible in the zone of 14,140 – 14,000 as it coincides with the daily ’89 EMA’ and the 78.6 per cent retracement of the up move from 13,596.75 to record high of 15,431.75. Before this, 14,400 – 14,250 are to be seen as immediate supports. On the upside, the cluster of resistances is visible at every 100-150 points. So, for the forthcoming week, 14,600 – 14,750 – 14,900 are to be seen as pain points for the Nifty. Till the time, 14,900 is not surpassed with some authority, the short-term trend remains bearish and hence, it’s better not to get complacent.

Here, the only tricky point is the placement of the banking index. It has already corrected in line with our expectations and has underperformed our benchmark significantly in the recent past. This space saw massive recovery in the latter half on Thursday after precisely testing the ’89-EMA’ level of 32,420. This level coincides with the previous breakout point on the budget day.

Hence, it would be really interesting to see how it behaves going forward. If it fails to show any strength here, we should then gear up for an extended correction. In the bull-case scenario, it’s located just at the right junction from where it can take a U-turn.

Let’s see how things pan out because the other sectors too started participating in the correction and the broader market

which has been convincingly outperforming, started to see some decent profit taking.

Stock recommendations

NSE scrip code – ASIANPAINTS

View – Bullish

Last close – Rs 2,505.15

Justification – All ‘paint’ stocks had a quiet period of nearly couple of months and in fact, in the process, we witnessed a decent price as well as time wise correction in most of the counters. ‘ASIAN PAINTS’ being the giant in this space has always been a rank outperformer over the years. On Friday, we witnessed the first sign of strength after a while now as stock prices

managed to come out of its recent congestion phase. With a broader view, stock prices corrected after a good trended move and then went into a consolidation mode. Now, finally the prices seem to have completed its corrective move and are poised for a resumption of the uptrend. We recommend going long on dips for targets of Rs 2,580 – 2,610 in the coming days. The

strict stop loss can be placed at Rs 2,458.

NSE scrip code – JSW ENERGY

View – Bullish

Last close – Rs. 87.50

Justification – Since the March fiasco, this stock has been maintaining its sturdy structure and we can see a series of ‘Higher Highs Higher Lows’ on all time frame charts. Also, it’s interesting to see that despite lot of stocks from the broader market going through a bit of ‘Price Correction’ in the last few days; this stock chose to move sideways. Now due to Friday’s move, a breakout from small ‘Triangle’ is visible on daily chart. Importantly it is accompanied by the decent rise in volumes and hence, we expect the stock to do well in next few days. We recommend going long on a small dip for a target of Rs 93 in coming days. The strict stop loss can be placed at Rs 83.20.

NSE scrip code – HINDALCO

View – Bearish

Last close – Rs. 327.15

Justification – The entire commodity cycle especially for the Base Metals is clearly on a roll. However, recently we saw some cooling off in most of these names. In this process, ‘Hindalco’ managed to sneak below its ‘20-day EMA’ for the first time after nearly two months. Although, the entire metal pack has managed to rebound sharply in last couple of days, we are taking a

trading punt on the short side looking at the ‘Bearish Crossover’ of ‘5&20 EMA’ on the daily chart and prices retesting it on Friday. On the hourly chart, prices are trading below ‘200-SMA’ which we believe is likely to act as a hurdle. Hence, purely with trading view, we recommend going short against the major trend for a target of Rs.314 in coming days. Looking at the volatility and high beta nature of the stock, the stop loss can be placed at Rs.332 on a closing basis.

Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at The analyst may have positions in one or more stocks. Views are personal.

Source link