The weakness in mid & small cap segment has started after the sharp up move of the last few months and we are now observing a formation of important top reversal pattern in the mid & small cap segment, Nagaraj Shetti, Technical Research Analyst at HDFC Securities, said in an exclusive interview with Moneycontrol’s Kshitij Anand.
Q) It was a week which belonged to the bears. The index lost momentum after the Budget session and slipped over 300 points in just one week. Where is the market headed in the coming week?
A) Post Union Budget 2018, Nifty50 has confirmed the top reversal pattern and the all-time high of 11,171 of 29th January could now be considered as an important top reversal for the Nifty as per smaller to a larger timeframe.
The underlying trend of Nifty remains weak for the next week and one may expect Nifty to slip below the recent low of 10,276 levels by next week.
Q) What should be the ideal strategy for mid & small caps post Budget which is attracting some bit of selling pressure?
A) The weakness in mid & small cap segment has started after the sharp up move of the last few months and we are now observing a formation of important top reversal pattern in the mid & small cap segment.
The underlying trend in this segment is negative with bearish pattern formation in the charts and in momentum oscillators. It is advised to book profit or exit from long trading positions.
Traders are advised to place a strict stop loss on trading long positions in the mid & small cap stocks, as we are likely to see more weakness in these segment ahead.
Q) How is the market looking on the weekly as well as monthly charts?
A) The trend of Nifty as per weekly and monthly is down. The present weakness is expected to continue in the coming weeks or months. Although Nifty placed at the immediate support of around 10,400 levels, the support could eventually be broken on the downside.
Q) What should be the strategy — buy on dips or sell on rallies in the coming week?
A) We are expecting a recent swing high of 11,171 levels as an important top reversal pattern in the Nifty and this swing high is unlikely to be broken on the upside for the next few months.
The technical lower tops and bottoms scenario could come into the picture. Hence, any upward bounce from here is going to be a sell on rise opportunity for near term.
Q) Top 3-5 stocks which are looking attractive at current levels based on technical?
A) SAIL, IPCA Lab, and Bharat Forge are showing resilience in this weak broader market and have outperformed during this week.
There is a space for some up move in these stocks for the next 1 or 2 weeks. Hence, these stocks could be bought for a reasonable trading gain by placing strict stop losses.moneycontrol