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The Importance of Remaining Cautious as Positional Traders

Positional traders are advised to exercise caution until the Nifty index closes above 19,800 levels. The market experienced a decline on October 9 due to increased fears of a wider conflict between Israel and Hamas. The Nifty closed at 19,512.4, down by 141.2 points, with the volumes of the NSE cash segment being the lowest since June 27.

Examining the short-term trend of the Nifty, it remains weak as the index is trading below its 11-day and 20-day EMA (exponential moving average). Additionally, aggressive Call writing has been observed at 19,700-19,800 levels, which coincides with the previous swing high made on September 28 at 19,767.

Therefore, it can be considered that the immediate resistance for the Nifty lies within the range of 19,700-19,800. To navigate this volatile market, caution is advised until the Nifty index manages to close above the 19,800 level. On the other hand, the Nifty has an immediate support level at 19,333, which was the low of the previous week. Furthermore, a positional support level is expected at 19,100, derived from the upward sloping trendline that connects the major swing tops of October 2021 (18,604) and December 2022 (18,887).

To gain a clearer perspective, we can understand that the Nifty is currently trading within the range of 19,100-19,800. The definitive trend will only be established once the index closes above 19,800 or below 19,100. As a result, it is crucial for positional traders to remain cautious until the Nifty surpasses the 19,800 level.

In addition to the Nifty, the midcap and smallcap indices have also experienced a downturn in their short-term trends. They have closed below their important moving averages, signifying a potential correction before resuming their primary uptrend. Therefore, in the coming weeks, it is advisable to be discerning when purchasing midcap-small cap stocks for the purpose of short-term gains.

With regards to investment recommendations for the next 3-4 weeks, here are three suggestions:

1. IRB Infrastructure Developers: Buy

LTP: Rs 31.2 | Stop-Loss: Rs 29 | Target: Rs 33.75-35 | Return: 12 percent

Currently, the stock price has broken out from the downward sloping trendline seen on the weekly chart, which connects the highs of December 16, 2022, and May 19, 2023. Moreover, the primary trend of the stock is positive as the stock price is trading above its important weekly moving averages.

2. Max Financial Services: Buy

LTP: Rs 896 | Stop-Loss: Rs 850 | Target: Rs 950-985 | Return: 10 percent

Similar to the previous recommendation, the stock price of Max Financial Services has broken out on the monthly chart from the downward sloping trendline. Additionally, the primary trend of the stock remains positive as the stock price is placed above its important moving averages. The correction of around 5 percent from the recent high presents an opportune time for investment.

3. Hindustan Copper: Sell

LTP: Rs 149 | Stop-Loss: Rs 158 | Target: Rs 139-135 | Return: 9 percent

Unlike the first two recommendations, the stock price of Hindustan Copper has broken down on the daily chart by closing below multiple support levels of Rs 151-152 with higher volumes. The short-term trend of the stock has become weak, indicated by the closure below important short-term moving averages. Furthermore, the RSI Oscillators are sloping downwards and placed below 50 on the daily chart, highlighting the stock’s downtrend strength.

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

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