How to read what happened this week and what is the outlook?
It was a difficult week for the markets. Nifty just one shade below the 17,000 mark and Bank Nifty below the 36,000 mark is causing a lot of anxiety among market participants. But this is a natural correction that the markets have been hinting at in recent months. Finally, this correction entered the indices.
Now there are a lot of parameters to try to gauge this fix and how far it can go. For example, Bank Nifty approached its 200-day moving average. It is only 200-250 points away from testing its 200-day moving average and this could be the first test Bank Nifty can take in the past eight or nine months. Therefore, it will be a very important support point for the index. The second way to look at it is the 100 day moving average support for the Nifty. In the previous two corrections, the 17,100 mark, which is close to the 100-day moving average level, was key support for the index. We have managed to keep the 100-day moving average the previous two times with a margin of error of 0.5% to 1%. So if we manage to get around that 100-day moving average roughly over the next couple of days and volatility decreases, it could also indicate that the markets would return to a stable path.
Overall, we are in a downtrend, but a better opportunity to try and sell the market would not be when the markets are in extremely oversold territory, but to wait for a rebound like the one that occurred in the past. middle of this week.
What does Nifty Pharma look like on the charts? Is there renewed interest in this particular sector?
After five consecutive weeks of negative close, this was the first week of respite for the Pharmaceuticals index. I call this a respite because while many pharmaceutical stocks did quite well on Friday, there are plenty of breakouts the sector needs to provide over the next two straight weeks before we can call it a reversal. Having said that, the texture of the pharmaceutical rally was very interesting. It was not the usual big pharma companies like Sun Pharma or Dr Reddy’s that were the leaders, but the Tier II pharma companies that did pretty well.
Aurobindo Pharma has recovered around 8-10% of its intra-week low while Glenmark Pharma is above 10-12%. This was also the case with other names like Divi’s Lab, etc. There was a lot of recovery involved. So anytime you see such a type of recovery it is usually a short-lived rally that occurs due to the oversold nature of the indicators for many stocks. And once the short hedging is over, we wait for long accumulated formations to occur where traders are more confident to take long positions.
So if we see this change happening in the Pharmaceutical Index, which I believe maybe over the next week or at most two weeks, we could see these patterns unfold. And then we could talk about a more substantial rally of names in pharma. You have to proceed step by step. For now, we could probably play it for a short-term rally, especially Biocon, Glenmark Pharma, Natco Pharma, as they look a lot more attractive than the usual large-cap pharmaceutical names.
What are your choices for the week?
For the coming week, many pharma names could enter a rebound mode. Thus, one can choose Biocon at current levels. The stock looks attractive. With Syngene rebounding and breaking above the 200 day moving average, I think Biocon should also probably try to follow a very similar type of chart path for itself. Keep a target at Rs 400 and stop loss at Rs 340.
The second call would be a sale on Manappuram. It looks quite weak in terms of graphic structure. The stock fell below its major swing support on the short-term chart. The targets that traders could be looking for should be closer to the Rs 160 mark and the stop loss could be held at Rs 175.