Nifty short-term trend negative, steep correction likely; sell these two stocks to cut losses

Nifty short-term trend negative, steep correction likely; sell these two stocks to cut losses

By Nagaraj Shetti

After showing range-bound action in the last four sessions, Nifty witnessed sharp weakness on Wednesday and closed the day lower by 226 points. A long negative candle was formed on the daily chart, which indicates a downside breakout of the sideways range movement in the market. Presently, Nifty is placed at the crucial support of previous swing lows around 17,780-17,800 levels. Hence, previously, we have seen decent upside bounces from this support. As long as this support holds, the chances of a pullback rally exist. The recent upside breakout of the triangle pattern has been negated with Nifty reaching the lower end of the triangle at 17,800 levels on Wednesday. This is not a good sign, as the weakness could be intensified on the move below 17,750 levels.

Stock Picks:

Sell RAIN FEB FUTURE- (CMP Rs 170)

The recent upside bounces in Rain Ltd seem to be over, as the stock price has reacted downwards sharply in the last two weeks. The stock price has made a false upside breakout of the crucial resistance of down sloping resistance line at Rs 185 this week and slipped into weakness. The negative chart pattern like lower tops and bottoms is intact as per the weekly timeframe chart. Weekly RSI shows a negative indication. Selling can be initiated in RAIN Feb Future at CMP (170), add more on the rise up to Rs 175, and wait for the downside targets of Rs 158 and Rs 148 in the next 3-4 weeks. Place a stoploss of Rs 180.

Sell GNFC FEB FUTURE – (CMP Rs 556)

The stock price has been in a downtrend over the last few months. We observe negative chart patterns like lower tops and bottoms over the period of time. The pullback rally of the early part of Jan seems to have been completed and the stock price has turned down from the lower top formation. Further weakness from here could pull the stock prices down to the new lower bottom below Rs 515 levels. Volume pattern and RSI show more weakness ahead for the stocks future ahead. Selling can be initiated in GNFC Feb Future at CMP (556), add more on the rise up to Rs 570, and wait for the downside targets of Rs 512 and Rs 480 in the next 3-4 weeks. Place a stoploss of Rs 585.

(Nagaraj Shetti is a Technical Research Analyst at HDFC securities. The views expressed are author’s own).