Amid bearish trends, the Indian benchmark indices ended with declines on Tuesday led by selling pressure in IT, auto and bank stocks. While S&P BSE Sensex settled at 71,139.90, down 801.67 points or 1.11%, the broader Nifty closed with declines of 215.50 points or 0.99% at 21,522.10.

When they resume trading today, 21,500 will remain an important support level for Nifty and a significant decline below this level could potentially initiate a correction in the market, Rupak De, Senior Technical Analyst at LKP Securities said. “Nifty exhibited volatility throughout the day, with a prevailing bearish trend. The daily chart indicates the formation of a dark cloud cover, implying a bearish outlook in the near term,” De said.

On the upside, sustained trades above 21,500 might lead to an upward movement in the market, he opines.

We spoke to analysts on how one should trade stocks that were in focus in the previous trading sessions based on derivative and technical data:

Analyst: Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research, SBI Securities told this to ETMarkets

Trent gives rising wedge pattern breakdown

The stock of Trent has given breakdown of Rising Wedge pattern on daily time frame. This breakdown was notable as it coincided with above-average trading volume over the past 50 days, adding weight to the downward momentum. Furthermore, the appearance of a sizable bearish candle during the breakdown reinforces the prevailing bearish sentiment. The Rising Wedge pattern, characterized by its widening base and narrowing trading range as prices ascend, typically signals a potential reversal to the downside, suggesting a shift in market sentiment towards bearishness.With this pattern breakdown, the stock has also managed to close below its weekly pivot and short-term moving averages, i.e. 13-day EMA and 20-day EMA. These averages have started edging lower. Further, the rising slope of the 50 and 100-day EMA has slowed down significantly. The daily RSI is currently quoting below its 9-day average and they both are in falling mode. Moreover, the daily stochastic has also given a bearish crossover, a bearish sign.The derivative data signals significant long unwinding, with a 6.17% dip observed in the February series future. Meanwhile, there is a notable 3.54% decline in the cumulative Open Interest (OI) across the current, next, and far series. There is a notable concentration of CALL open interest at the 3200 strike, followed by the 3300 strike. At the same time, significant open interest on the PUT side is observed at the 3000 strike.

These technical and derivative factors indicate bearish momentum in the stock. Hence, we recommend building the short position in the zone of 3070-3040 level with the stop loss of Rs 3150 level. On the downside, it is likely to test the level of 2900, followed by 2840 in the short-term.


F&O data suggest long build up in LIC Housing Finance

LIC Housing Finance broke out of its 17-day consolidation phase on Monday, backed by strong trading volume. The positive momentum continued on Tuesday, marked by higher trading volumes. Notably, the stock significantly outpaced the frontline indices on Tuesday. Since August 2023, the Mansfield Relative Strength indicator has consistently remained above the zero line, indicating a sustained trend of outperformance as compared to the broader market.

As the stock is trading at a 52-week high, all the moving averages and momentum indicators-based setups are showing strong bullish momentum. The daily RSI is in the super bullish zone as per RSI range shift rules. On the daily chart, the signal line of MACD has crossed the zero line and the histogram has turned positive, further affirming the bullish sentiment.

On the derivative front, the February series future has surged by 2.86%. The cumulative OI of current, next and far series has surged by nearly 4%, which indicates an overall long build up. A significant concentration of CALL open interest is evident at the 650 strike, while substantial open interest on the PUT side is concentrated at the 600 strike. Delving into the options chain, there has been a discernible accumulation of long positions from 655 to 625 CALL strikes. Conversely, on the PUT side, noteworthy PUT writing is observed from 650 to 675 strikes. This indicates bullish momentum in stock.

Hence, we recommend accumulating the stock in the zone of Rs 620-615 level with the stop loss of Rs 595 level. On the upside, it is likely to test the level of Rs 650, followed by 670 in the short-term.


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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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