Correction formation may continue

Mumbai: On the last day of week the benchmark indices continued positive momentum, BSE Sensex was up by 642 points. Among sectors, all the major sectoral indices registered buying interest, but PSU Bank index outperformed, gained 6.5 per cent.

During the week, the market bounced back sharply but on last Friday it witnessed profit booking at higher levels.Technically, the market completed one leg of rally and now 74,515 (last Friday high) would be the crucial resistance area for short-term traders.

Below the same, the market could slip till 50-day SMA (Simple Moving Average) or 73,225. Further, down side may also continue which could drag the market till 72,800. On the flip side, fresh uptrend rally possible only after dismissal of 74,515. Above the same it could move up till 75,124-75,500.

For Bank Nifty, 20-day SMA or 48,000 could act as a sacrosanct level. Below the same, the sentiment could change. Below which, it could retest the level of 47,500-47,250 or 50 day SMA. “We are of the view that, as long as the market trading below 74,515 level. The correction formation is likely to continue,” says Amol Athawale, V-P (technical research), Kotak Securities.

Prashanth Tapse, senior V-P (research), Mehta Equities says, adds: “The fall was on expected lines as both benchmark indices had rallied for five straight sessions and profit-taking has been due for some time. Correction is also attributed to global factors after Japanese Yen fell to new 34-year low and disappointing US data pushed its benchmark yields to over 4.7 per cent, thus worsening hopes of an interest rate cut in the medium term.”

Fresh uptick in international crude oil prices on the back of ongoing West Asia conflict may also play a spoilsport and weigh on domestic inflation.

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

Stock Picks

Zaggle Prepaid Ocean Services Ltd

CMP: 308 | SL: 285 | Target: 380

The stock has given a good breakout above its anchor VWAP resistance mark of 305 on its daily timeframe charts. The RSI (14), being around 59 and showing a minor uptick, indicates signs of momentum pickup in the stock. At the current market price of 308, the stock appears to be a good buy with a strict stop-loss of 285 for potential targets of 380 and above.

Havells

CMP: 1,640.05 | SL: 1,560 | Target: 1,750

The stock has given a strong breakout above its all-time high mark of 1,591.35 on its daily timeframe charts. With the weekly closing well above its breakout resistance zone and RSI (14) near 71, overall momentum appears to be strong, and the stock seems poised for an upside move towards 1,750 and above. A strict stop-loss should be kept at the 1,560 mark to manage risk effectively.