Hawkish Fed hits sentiment, Nifty’s resistance at 18,700

The near-term outlook for the Nifty is bearish after the selloff in the previous two sessions triggered by hawkish commentaries from the US and European central banks, which rattled investor confidence towards risk assets. Analysts expect selling on rebounds with 18,500-18,700 expected to be hurdles for the Nifty. Traders would watch if the index is able to stay above the key support level of 17,900. Stocks like , , , , , and L&T can be bought for trading, according to technical analysts.

RAJESH PALVIYA
HEAD TECHNICAL DERIVATIVES, AXIS SECURITIES

Where is the Nifty headed this week?

Nifty broke down its upsloping trend line support and slipped below the 20-SMA (18,528), indicating weakness ahead in the near term. If Nifty remains below 18,500, it will witness supply on any minor pullback. If it crosses and sustains above 18,500, it will witness buying, which would lead the index towards 18,650-18,850. However, if it breaks below 18,100, it would witness selling, taking it towards 17,800-17,600.

What should investors do?

One can focus on stocks like NFL, RCF,

, Balrampur Chini, Britannia, United Spirit, and L&T. This week, traders can initiate a moderately bullish strategy with reduced premium outflow and lower breakeven point called Bull Call Spread of December 22 expiry wherein traders can buy one lot of 18,300 Calls at Rs 99 and simultaneously sell one lot of 18,550 Calls at Rs 25, so the net outflow or maximum loss will be restricted to up to Rs 3,700. On expiry, if Nifty closes above the breakeven point of 18,374, the strategy will start making profits. The maximum gains will be restricted to Rs 8,800 as the gains of the long 18,300 Calls will be offset by the sold 18,550 Calls if Nifty closes above 18,550 on expiry.

DHARMESH SHAH
TECHNICAL ANALYST,

Where is the Nifty headed this week?

The weekly price action formed a bear candle carrying lower high-low after nine weeks, indicating a pause in upward momentum. A decisive close below the 20-EMA coupled with intermediate support of 18,300 signifies prolongation of corrective bias wherein strong support is placed at 17,900. Past two weeks’ high of 18,700 would act as key resistance. The ongoing healthy retracement of the preceding nine-week rally (16,750-18,887) would help the index cool off from the overbought conditions and subsequently form a higher base paving the way for the next leg of up-move.

What should investors do?

Since June 2022 lows, the index has not corrected for more than three consecutive weeks. With two weeks’ correction already in place, we expect the market to form a base that would present buying on dips opportunity. On the stock front,

, SBI, and L&T look good for 5-7% upside; while in midcap, , , GPPL, Balrampur Chini, , KEC look good for an 8-10% upside in the short-term. BFSI, PSU, capital goods, and telecom sectors are preferred.

SAMEET CHAVAN
TECHNICAL ANALYST, ANGEL ONE

Where is the Nifty headed this week?

The benchmark index has now sneaked below the key swing low of 18,350, and a close below this support opens the possibility of extended correction towards 18,130- 18,000-17,900 in the coming sessions. Even if this scenario pans out, we do not expect the correction to aggravate below the lower end of this support range. The higher degree up trend remains intact as long as we manage to hold this. On the flip side, 18,450- 18,600 are to be treated as immediate hurdles. If bulls have to regain their strength, 18,450 needs to be surpassed with some authority, negating the breakdown from the small ‘Head and Shoulder’ pattern on daily chart.

What should investors do?
Traders are advised to stay light for a while. Balrampur Chini has seen a strong breakout in the last trading session on robust volumes and has surged above the 200- day simple moving average, indicating inherent strength in the counter. The stock will likely witness a strong followup move in the comparable period with a target of Rs 415- 420 and a stop loss of Rs 380. Varun Beverages is in a secular uptrend and is hovering near its lifetime high levels. The stock is looking lucrative and has the potential to continue its upward journey toward Rs 1,540.