11,600 key resistance level for Nifty in the short term

By Rohit Singre

As the Nifty seems to be displaying signs of a near-term top established around 11,760, investors should refrain from adding any aggressive long positions and wait for the index to head lower in order to add quality stocks to their portfolios, according to technical analysts. Oil marketing companies seem to have completed their major corrective moves which commenced almost a year ago and could be considered for bottom fishing in the near term, they said.

Where are we: The Nifty closed at 11,515 on Friday with loss of 74 points on weekly basis and formed hammer candle pattern on weekly chart showing buying interest at the lower levels.

What is in store: Technically speaking, the index is trading in an upward channel pattern and we have witnessed strong correction from the upper band of the channel making a cautious view on the index for the short term but if Nifty manages to sustain above 11,600 then we may see some more buying interest and fresh levels in the near term. On the derivative front the highest open interest is in 11,800 CE and on the lower side 11,400 PE making a strong range of 11,400-11,800 for current series.

What could investors do: As the Nifty has immediate resistance near 11,600 one needs to wait for these levels to surpass for a better entry or any dip near the 11,400-11,300 zone would be good buying bet for a short- to mid-term time frame. Also we suggest keeping more of sector and stock-specific approach. The Nifty metal index has seen good buying interest during some of the past sessions and we have witnessed very good bullish reversal breakouts so one can look for stocks like Jindal Steel, Tata Steel, Vedanta etc. Some of the technical picks where investors can catch dips for 10-15 per cent return in the near term are Bajaj Auto, MOIL, Bharat Forge, Eicher Motor and Wockhardt.

(The author is Senior Technical Analyst, LKP Securities)