Nifty made a pause close to our lower band of 5190 and some short covering could be seen in the final hour of the trade. As mentioned in the previous post stocks like SBI and ICICI bank have registered new lows and trading very weak. Though the structure is really broken down wait for a short term bounce in major banking stocks for going short. In the short term any upside move could attract lot of selling pressure close to 5300 levels. Thus nifty could come to 5050 levels where the next level of retracement is placed. If we observe the charts most of the bigger stocks are forming a much larger distribution pattern and this could be a dangerous sign for any upmove.Some stocks like TATA steel , Orchid chemicals, ABAN, Sail, BPCL etc are quite good examples for this distribution pattern. As i mentioned in the previous weekly post the current down trend may continue till the 5th of May where it could make a trend deciding move and we are close to that date.The decline in some of the stronger stocks like TATA steel and HDFC are really disappointing for the bulls and these stocks would lead the decline if nifty starts coming down. If i want to be a buyer i would just try with a beaten down stock like BHEL as the stop would be close by. In the commodities market copper is taking a pause close to 448 levels and thus it could affect the metal stocks in a bad way. Volatility index was on the rise indicating accumulation of short positions on the rise.5180-5190 could still be a decent support on the downside where one could take off some money from the short selling trade but these support levels cannot not lead to strong upmove. We could keep a range of 5180 - 5240 where the break out of lower band is considered to be a major break down to 5050 level.
Catching the momentum
1. TATA steel - The stock was in a range bound mode since February and got enough time to get distributed on the up side. Thus below today's low it could confirm the distribution activity and could lead the stock to 410 levels. If you want be on the long side it is better to wait for a confirmation on the upside. The same can be applied to stocks like ABAN, SAIL where we could see a much larger distribution pattern.
2. BHEL and POLARIS - BHEL is in severe down trend for quite a long time and the stock has got enough time for the distribution.Thus as an investor i would like to search for some buying opportunities in this stock. Buy in small quantities and as an investor complete the accumulation in a larger range of 40-50 points. Polaris looks like an oversold stock and it does not qualify to be a short candidate. If there is a short term bounce in nifty the stock could go upto 140 - 142 where lot of short positions are lying.
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