Podcast | Stock picks of the day: 11,430 is the last ray of hope for the bulls

Traders are advised to stay light and avoid taking any undue risks. Existing longs should be exited if the index breaches its key support of 11,460-11,430 convincingly

After the Budget, market participants looked disappointed, which triggered massive sell-off, especially in some of the marquee outperformers.

To make it worse, we had a decent gap-down on July 8, which accelerated as the day progressed. Eventually, the July 8 session turned out to be the weakest day of the current calendar year.

Fortunately, this mayhem got arrested the following day (July 9) and then we witnessed a mild recovery throughout the remaining part of the week to eventually conclude the week with a fall of a little over two percent.

Last week’s low of 11,461 holds a lot of significance because it coincides with multiple technical pieces of evidence such as i) 61.8 percent retracement of the recent rally (11,108–12,103); ii) Trend line joining previous lows, and iii) The vicinity of the bullish gap formed after exit poll numbers.

For the time being, the market has respected this crucial junction. But going forward, it would be important to see how the index behaves around it.

In case of a breakdown below 11,460–11,430 levels, the selloff is likely to escalate. The index may test levels of 11,250-11,230 or even a move towards May lows (11,108) cannot be ruled out.

Till the time we are trading above 11,460, there is still hope for the bulls. However, on the upside, previous support of 11,640 is now acting as a sturdy wall.

If the index has to regain any strength, it needs to convincingly surpass this hurdle of 11,640-11,700. For a time being, 11,430–11,640 would be seen as a crucial range for the index.

Traders are advised to stay light and avoid taking any undue risks. As mentioned in the above section, any existing longs should be exited if the index breaches key support of 11,460-11,430 convincingly.

Here is a list of top two stocks that could return 7-8% in the next 3-4 weeks:

Jindal Steel & Power: Buy| LTP: Rs 139.05| Target: Rs 150| Stop Loss: Rs 134| Upside 8%

The metal space has been underperforming since last year and a half. However, we have been vocal about this sector possibly undergoing the last phase of its time as well as price-wise correction.

Since the last couple of days, we are witnessing strong buying emerging in these names and ‘Jindal Steel’ has managed to give a decent rally after consolidating around its multi-year trend line support of Rs 130.

The weekly chart looks extremely encouraging and hence, we at least expect a trading bounce in the next few days. We recommend buying for a target of Rs 150 and a stop loss should be fixed at Rs 134.

UBL: Buy| LTP: Rs 1386| Target: Rs 1445| Stop Loss: Rs 1345| Upside 7%

This midcap name has been consolidating off late after having a remarkable calendar year 2018. This consolidation itself is a sign of strength if we compare it with the broader market destruction in last one and half a year.

In fact on Friday too, it was clearly bucking the trend. On the daily chart, we are witnessing yet another breakout from the recent small congestion zone and Friday’s up move indicates the possibility of giving a decent price move in the next few days.

Thus, traders can look to initiate longs at current levels for a target of Rs 1,445 and a stop loss should be fixed at Rs 1,345.

(The author is Chief Analyst- Technical & Derivatives, Angel Broking)

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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