Caution alert for short-term traders

Profit booking continued in Indian markets, NSE Nifty ends 216 points lower, while BSE Sensex was down by 617 points. Among sectors, Metal index lost the most drag over 2.5 per cent whereas some buying interest was seen in banking and selective financial stocks.

Technically, from last four trading sessions, market has been consistently facing selling pressure at higher levels. After a sharp correction currently, the market is trading near 20-day SMA (Simple Moving Average).

Shrikant Chouhan, head (equity research), Kotak Securities, said: “We are of the view that, the market has completed one leg of correction and for the traders now 20-day SMA or 73,800 would act as trend decider level above which, the index could bounce back till 74,100-74,500.” On the flip side, fresh sell off possible only after dismissal of 73,800 level, below which the market could slip till 73,500-73,300. Short-term traders should remain cautious and be very selective as there is a risk to get trapped at lower levels.

Election-related nervousness fuelled the intense selling. The Sensex also dropped 617 points to 73,886. Despite the anxiety, India VIX edged slightly lower to 24.17. “Key losers included Tata Steel and Tech Mahindra, while ICICI Bank and Axis Bank saw gains. Technically a bullish outlook remains, however, a sustained rise is crucial to overcome prevailing market uncertainties,” says Prashanth Tapse, senior V-P (research), Mehta Equities Ltd.

STOCK PICKS

GMR Infra

Trade: Buy| CMP: 81.05 | SL: 78 | Target: 88

The stock has touched the lower end of its wedge support on technical charts and is trading well above its trendline support mark of 81. The RSI (14) on the daily charts is around 41, indicating immediate oversold conditions for the stock, and it should witness a bounce back from lower levels. A strict SL should be kept at 78 for potential targets of 88 and above.

MCX

Trade: Sell| CMP: 3,606.45 | SL: 3,650 | Target: 3,300

The stock has broken down below its immediate support mark of 3,683 and also gave a weak closing below the same. With the overall trend being weak and the stock witnessing a good breakdown below important support levels, it looks like the overall momentum is strong and the stock should experience good selling pressure in upcoming trading sessions, eventually heading towards 3,300 and below. A strict SL should be kept at the 3,650 mark to manage risk well.

(Source: Riyank Arora, technical analyst at Mehta Equities)

CMP (Current Market Price); SL (Stop Loss)/All prices in Rs