Expert Take: Many evidences of imminent correction in Nifty

By Rahul SharmaHead - Technical and derivatives, Centrum CapitalSince Nifty is long heavy, any negative instance may result into long unwinding correction in the market, but technical analysts wait for confirmation from prices below 11,340 to form any bearish view on the market. Stocks like L&T Finance, Hindustan Unilever, Yes Bank, Mahindra & Mahindra, Titan, Tech Mahindra and Sun Pharma are looking strong to rally higher from current levels.Where we are: Last week, we witnessed a volatile move in Nifty; but bulls had an upper hand as the index concluded the truncated week at record level of 11,470. Despite the upmove, the bullish momentum is getting exhausted as market breadth remained in favour of bears in the last four out of five trading sessions. On the options front, a good amount of short positions are intact at 11,400–11,200 and 11,000 put; while 11,500 and 11,600 call writers are also quite active.What is in store: The Nifty is having a strong resistance of a ‘Rising Trendline’ around 11,630 mark on weekly chart. While, we are witnessing a formation of a Bearish Harmonic Pattern called ‘Bearish Butterfly’ on daily time scale. Currently, the index is hovering around the potential reversal zone (PRZ) at 11,440–11,500. Also, the momentum oscillator ‘RSI’ is showing negative divergence from over-bought territory on daily chart, indicating reversal on cards. On derivative front, open interest in Nifty is at highest level in last seven months. Since, Nifty is long heavy, any negative instance may result into long unwinding correction in the market. Though, above evidences are indicating possibility of correction in the index, we would like to wait for confirmation from prices (below 11,340) to form any bearish view on the market.What you could do: At the current juncture, we advise traders to remain light on positions and keep the stop loss of 11,340 for the long positions. Below 11,340, we may see a correction towards 11,150–11,200 level in coming days. However, till the index sustains above the 11,340, we may see some consolidation in Nifty in zone of 11,350–11,600. From last few weeks, we are seeing good buying momentum in many stocks and traders are advised to focus more on the same with proper risk management. Few stocks which can be traded with positive bias are Axis bank, L&T Finance Holdings, Titan, TechM and HUL. 65460599 65458891 65458597

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