ET Markets
12,248.2567.9
Stock Analysis, IPO, Mutual Funds, Bonds & More

Are tech charts signalling a big rally ahead for RIL?

Chart patterns suggest that the Reliance stock would consolidate now. Many of the indicators for Reliance Industries are showing dual signals. There is a divergence that has bearish implications on the stock price but at the same time, there is a very strong gap support for Reliance Industries and an upward gap at around the Rs 1,515-1,530 zone.

ET Now|
Updated: Dec 09, 2019, 08.25 AM IST
0Comments
BCCL
kunal bothra-bccl
Looking at the weakness in the markets and assuming that we could have a spillover effect next week, I would suggest a couple of shorting ideas.
Independent market expert Kunal Bothra says several factors have cumulatively led to a selloff in domestic equities. "In terms of levels, we are perched at very important support on Nifty at 11,800. And I believe the 31,000 mark would be a very important support for Bank Nifty," he said. Excerpts from an interview with ETNOW:-


ET Now: What happened to the banking space on Friday? Will it continue or can we expect some relief by next week?

Kunal Bothra: A couple of things happened. First, in purely technical terms, it's about how the prices behaved in the last one month or from the start of November in many stocks like Reliance Industries, SBI etc. Many of these stocks were making a pattern of new highs on a regular basis but many of the indicators for these stocks have started to make a new low. In technical terms, we call it a bearish divergence, where the prices keep on making new high but the indicators keep on making new lower high and that was one of the key reasons why there was pressure which was visible in the markets. Also, when you look at market internals specifically, since the start of the previous week the market breadth had started to deteriorate first; the advance-decline ratio was on the negative side for almost two or three consecutive days for the previous week and then the large caps started to bleed. These factors cumulatively I believe could have led to the market selloff. In terms of levels, we are perched at very important support on the Nifty at 11,800. And I believe 31,000 is a very important support for Bank Nifty.

ET Now: What are the chart patterns indicating for Reliance?

Kunal Bothra: Chart patterns suggest that the stock would consolidate now. Many of the indicators for Reliance Industries are showing dual signals. There is a divergence that has bearish implications on the stock price but at the same time, there is a very strong gap support for Reliance Industries and upward gap which was created a couple of weeks back around Rs 1,515-1,530 zone. The stock tried to penetrate this level twice in the last two weeks and on both of the attempts, the stock got back into the demand zone and there was buying which came across. There are two important observations here and both of them contrary to other. The general expectation is that the stock could go through consolidation but one has to understand that Reliance Industries has done exceptionally well in the last two or three months. It is not a high beta stock, it is a relatively low to medium beta stock in terms of price performance. So, if the stock moves up 20-30% in the short span of time, it calls for more time-wise correction rather than price wise correction. I believe Reliance Industries could be at the brunt of it. Over the next couple of weeks, I would expect more sideways range for Reliance Industries.

ET Now: What are your top picks for next week?

Kunal Bothra: Looking at the weakness in the markets and assuming that we could have a spillover effect next week, I would suggest a couple of shorting ideas. If the market goes into a mode where risk is taken back then I believe many of the high beta stocks would start to correct. Adani Enterprises would have picked up as a first stock on the short side. That stock looks to be retracing some of its gain which it had already shown in the last one or two months. It is placed at Rs 205 plus levels and would be a good shorting opportunity with a target at Rs 196, stop loss at Rs 212 mark. The second would be a sell on Bharti Airtel. The stock has an interesting chart because it is now on the verge of breaking its 20-day moving average support on the daily charts. Looking at the weakness in the last two or three days, the stock from Rs 470 odd levels has corrected gradually towards Rs 440 mark and I believe if this 20-day moving average gets breached it could drag a bit lower. So, I have a sell call on Bharti Airtel with a short term target of Rs 420 and stop loss at Rs 455.
Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service