Day trading guide: Auto stocks likely to underperform in the near future

Day trading guide: Auto stocks likely to underperform in the near future

Amit Trivedi, YES Securities

The Nifty corrected for the consecutive session as intraday recovery remained short lived and the momentum on the downside picked up pace, with Nifty breaking below Friday’s low. Appearance of another bearish candle after prior week’s multiple peaks between 14,600-14,650 could mean near-term resistance near 14,600. Intraday recoveries might be there. However, sustainability needs to be closely watched out as sustenance below 14,300 could continue to decline till 14,200-14,170 zones.

The Bank Nifty ended in red for the straight third session. Mild recovery or consolidation might be there if the prior week’s low (i.e. 31,726) is decisively held. However, a major move on the upside is unlikely.

All the sectoral indices ended lower, suggesting profit taking across the board. The Nifty Auto index lost ~2% and is likely to underperform from a near-term perspective.

Equity recommendation

Buy KSCL near Rs 540

  • Stop loss: Rs 525
  • Target: Rs 570
  • After surpassing the multi-month trend line, the stock is defending levels of Rs 530 during intraday decline. With sustained movement above short-term averages, positive follow through could attract buying interest.

Derivative recommendation

Sell IndigGo January future near Rs 1.600

  • Stop loss: Rs 1,650
  • Target: Rs 1,500
  • Breaking below Rs 1,620, the stock has resumed its recent downtrend. Negative follow-up action could drag the stock lower till the Rs 1,500 zone.

Amit Trivedi is CMT, Technical Analyst – Institutional Equities, YES Securities. Views are his own.)

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