Stock market on 12 February
In a highly unpredictable trading session, Nifty 50 and Sensex closed with slight declines, marking the seventh consecutive day of losses—the longest in three months. The indices began the day flat to slightly positive but gained momentum as investor sentiment brightened. This improvement was driven by both global and domestic factors, such as a drop in retail inflation to a five-month low and a decrease in crude oil prices due to reports of progress on ending the Ukraine-Russia conflict.
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More than 230 stocks reached their lowest point in a year on the BSE. Despite a short-term positive trend, the market still faces challenges in overcoming immediate obstacles. A strong move above 23,250 could indicate a near-term reversal, while immediate support is around 22,800.
Outlook for trading
With the picture becoming increasingly complicated, it’s wise to minimise participation and wait for clarity as the broader market remains under pressure. International signals are expected to influence trends, and their effect on the currency, as previously discussed, will play a role in this week’s movements.
We’ve decided to look at things from a different angle to reassess our perspective. On higher timeframe charts, we see that USD-INR has surged past consolidation. A long candle pattern on the weekly charts indicates a bearish trend. This has created some uncertainty, so it’s important to proceed with caution during this challenging trading week.
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The broader indices continue to suffer from lack of participation on the upside, making it difficult to mid caps and small caps to recover.
As the indices stumble through a challenging phase, we are now seeing stress gradually intensify. The shifting of options data from a Max Pain of around 23,200 to 23,100 clearly indicates that upside is now getting more difficult. The Put Call Ratio (PCR) is at 0.86. Considering that we could keep seeing selling pressure, one should look for an opportunity to go short.
The charts shown below highlights investors’ confusion as there was some buying from lower levels on Wednesday and from higher levels on Thursday. This shows the bears could continue to have a hold on market sentiment. The RSI is slipping and a move below 30 could be quite damaging.
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Three stocks to trade, recommended by NeoTrader’s Raja Venkatraman
•GODREJCP: Sell below ₹1,050 or up to ₹1,080 on rallies, stop ₹1,095, target ₹950
This counter has a long body candle that is seeing a fall in volume. Breaching the 320 level has caused it to decline further despite encouraging Q3 results, so more bearishness could be in store.
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•SUNFLAG: Buy above ₹230, stop ₹222 target ₹255
There has been steady news about this stock, which has helped it to rebound despite some pressure. It saw a revival on Thursday and the RSI also shows a positive divergence that could boost momentum. Look to initiate long.
•PIIND: Sell CMP and on rallies to ₹3,250, stop ₹3,275, target ₹3,165
Chemical stocks have been unable to show signs of a revival. PI Industries’ sharp drop below 3,400 has triggered a rapid decline. With the uncertainty in the market increasing, one should be looking at the increasing participation to the downside.
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Raja Venkatraman is co-founder, NeoTrader.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.