The stock is showing positive bias for the short term. HDFC Securities recommends investors to buy Bajaj Auto above Rs2090 for a target of Rs2174 with a stop loss placed at Rs2051(close) in 3-7 days.
1. RETAIL RESEARCH
Observation:
Week’s action formed a bull candle on weekly chart but the body of the candle is within the earlier candle which
signifies no fresh bullish momentum.
From the perspective of wave, one major impulse leg has ended at 6343 levels which is marked as “wave i”, the rise
from 5118 to 6343 had clear five wave structure (internals labeled as i-ii-iii-iv-v). After the end of “wave i” Nifty fell
and “wave ii” has ended at 5933; which is a “complex corrective pattern”-(Double combination internals are W-X-Y).
Then major “wave iii” is opened up from the low of 5933 and ended at 7808. The major wave iii’s internals are - the
rally from 5933 to 6870 was a clear impulse which was marked as “wave i of wave iii”. And the corrective leg for the
impulse was from 6870 to 6638 which was marked as “wave ii of wave iii”. The rise from 6638 to 7700 marked as
“wave iii of wave iii”. Minor correction from 7700 to 7741 was marked as “wave iv of wave iii”. Then the last rise from
7741 to 7808 was marked as “wave v of wave iii” where the Major “wave iii” has ended. The level of 7808 is the short
term top for the index.
Now index is in the progress of Major downward “wave iv” and we are just in the beginning of the corrective leg.
Initially we are giving down side retracement targets of 7100 - 6900 (38.2% or 50% retracement of the entire wave
iii). Right now we have one clue which is that the progressing corrective leg is simple correction (either Flat [3-3-5] or
Triangle [a-b-c-d-e]) as major “wave ii” was complex. The recent price development indicates that the falling leg could
be a Flat pattern (It’s not a zigzag pattern as the price has retraced more than 61.8% of the last fall). However in any
case index could slide down towards 7100 – 6900 but the internals may differ. This view would negate if index
moves above 7808.
Now inter-market divergence has been witnessed between Nifty & Midcap index which is the clear sign of the
corrective leg, same divergence happened in the corrective leg on December 13 to January 14.
RETAIL RESEARCH
Weekly Nifty and Stock Technicals
July 18, 2014
Nifty Perspective Support Resistance 200 Day EMA Weekly Pick
7663.90 Bearish 7420 - 7300 7730 - 7800 6737 Bajaj Auto
2. RETAIL RESEARCH
S&P CNX Nifty Daily
Observation:
Day’s action formed a spinning top candle on daily chart which indicates tug of war between bulls and bear in the near
term.
Technically, the pull back rally has moved above 61.8% retracement level of last falling leg, which is required for the
Flat pattern.
The 61.8% and 80% retracement band is the most crucial for the flat pattern; the respective levels are placed at 7662
& 7732.
The “wave B” of the Flat pattern could end in the above mentioned retracement band or it has ended already as it has
done the minimum requirement of the pattern.
The earlier breached trend line is acting as a change of polarity line; price is still trading below the line and last three
days price is attempting to move above the line but it has failed.
However there is no change in our earlier view, the “wave B” has already ended or could end slightly higher, then
“wave C” could begin down for our earlier mentioned targets of 7100 or more. This view would negate if index closes
above 7750.
The aggressive traders who are holding shorts as per our indication can continue holding with the same stoploss of
7750 on closing basis.
3. RETAIL RESEARCH
Weekly Pick
Stock Pick
Bajaj Auto
CMP : 2681.25
Recommendation
Buy : Buy above 2090
Stoploss : 2051(Close)
Target : 2174
Time : 3-7 days
Observation
The stock is showing positive bias for the short term.
The price has completed one falling leg at 2051.50 and from
there the price has reversed.
Long legged doji pattern has been witnessed on daily chart
which is a bullish reversal pattern.
Now pullback leg is likely to start and price could head towards
38.2% (2174) retracement level of last falling leg from 2365 to
2051 levels.
In addition one five wave decline has ended and there could
be a three wave advance toward the target or more.
Traders could buy the stock above 2090 with the closing
stoploss of 2051 for the target of 2174 levels.
4. RETAIL RESEARCH
Note: Once the market opens for trade, the analyst will review it and decide to give the call through an internal mail/SMS at the same or different levels of entry, target and stop loss or not give
the call at all or give a call in Futures/call/put. Clients could get in touch with the analyst through their designated dealers to check about this.
Analyst: Gajendra Prabu (gajendra.prabu@hdfcsec.com)
HDFC securities Limited, I Think Techno Campus, Building ‘B’, “Alpha”, Office Floor 8, Near Kanjurmarg Station, Opposite
Crompton Greaves, Kanjurmarg (East), Mumbai – 400042, Fax: (022) 30753435
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