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Nifty may bounce back to 10,700-10,800 in short term; metal stocks likely to be best performers

10,000 is the first major support below which 9,200 is possible. 9,200 is close to a 61.8 percent retracement of the entire move from the December 2016 bottom to the February 2018 top.

After the market correction, Rohit Srivastava, Fund Manager – PMS, Sharekhan, feels that the Nifty may bounce back in the near term to 10,700-10,800. Metal stocks are likely to be the best performers, he said in an interview to Moneycontrol's Sunil Shankar Matkar. Here's an excerpt from that interview:

Q) After recent correction followed by volatility, what is your technical outlook on market and target for year-end?

After the market correction we are looking at the Nifty bouncing back in the near term to 10,700-10,800. STOCK TRADING TIPS

The recent fall to 10,276 retraced around 23.6 percent of the entire rally from the December 2016 bottom. The fall also saw the Nifty make a false breakout above 10,760 and then fall below it. 10,760 was the trend line of the August-November tops. This failure to breakout amounts to a trend reversal.

The risk reward on a one year basis does not appear favorable. The upside maybe capped at the 11,171 high seen recently and the downside is open to a 10-20 percent correction at some point.

10,000 is the first major support below which 9,200 is possible. 9,200 is close to a 61.8 percent retracement of the entire move from the December 2016 bottom to the February 2018 top.

Q) Banks corrected a lot recently. Do you think the phase is over, or will the Bank Nifty correct more? What is your year-end Nifty Bank target?

Nifty Bank too could see a correction in the coming months as interest rates are likely to rise given the falling bond prices around the world. That said a 10-20 percent cut in Nifty Bank at some point during the year is very much possible.

25,000 is the first major support below which 22,700 is possible. The recent correction saw prices breakout above 26,500 and then fall back below it amounting to a false breakout. This marks a trend reversal along with weekly momentum indicators that are now in sell mode.

We have retraced 23.6 percent of the December 2016 rally and 22,700 is around a 50 percent retracement of the rally.

Q) Crude oil prices slipped to USD 62.5 a barrel from USD 71 a barrel. Do you think the crude prices will be rangebound?

Crude started a rally from USD 42 a barrel amid a lot of pessimism, however the move caught on and we have been making higher tops and bottoms for months.

The recent correction was the steepest for the period but is still above the low of USD 56 seen in December. As long as we make higher bottoms the trend is up.

Crude Oil prices are finding a base at USD 58 and could remain between USD 58-61 over the next few months because of the huge long positions reported by CFTC in the recent months.

However after a consolidation and unwinding of those longs a move towards USD 70 later in the year is expected.

Q) What are 10 (or as per your advisory) technical picks you advise for short-to-medium term?

The falling dollar has been the biggest macro-economic trend of the last year and technically this trend is likely to continue. This has led to a reflation rally in metal prices and base metals like Copper Zinc and Aluminium are likely to continue making new highs.

Thus metal stocks are likely to be the best performers. Stocks like Vedanta, Tata Steel and National Aluminium or Hindustan Zinc, should outperform even in a weak market, as they continue to make higher tops and bottoms. This would be my single bullish sector for the coming year.
www.shristocktips.com

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