Stock picks of the day: Nifty on track to hit 11400 but trade war woes to cap upside

The India equity market continued with upward momentum on a week-to-week (WoW) basis registering multiple lifetime highs on the price chart.

However, the market turned cautious in two trading sessions to trade down on the backdrop of RBI’s rate hike coupled with re-escalation of trade tariff by US President which erased some initial gains.

The Nifty index tested a major level just below 11,400 zones to make higher-band of 11,390 levels but failed to sustain over trade woes.

After closing on a higher note on Tuesday at 11,356 levels, the index slipped to a low at 11,234 levels in the week. Towards the weekend session, the index managed to recoup some of the initial losses to close at 11,360.80, up 0.73 percent on weekly basis.

After breaking down from the psychological level of 11,300 levels on Thursday, the index formed a Bearish ‘Belt Hold’ pattern on the daily candlestick chart. But, the pattern got negated as Nifty formed a bullish candle in the next trading session.

The weekly RSI stood at 71 levels indicating a marginal divergence while MACD continued to trade in the bullish trajectory as it stood above the Signal-Line.

With breakout from the higher band, the index is likely to face immediate resistance at 11,400-11,390 levels in the coming week, while supports are placed at 11,200.

As market proceeds through mid-way of earnings season with optimistic sentiment so far, we expect the market to continue on positive biasness in the short-term basis.

However, a re-escalation of trade war between US and China is expected to keep the index under volatile setup. We advise investors to be stock specific only to build a fresh long position.

Given the fresh rally, we expect the Nifty index to trade at 11,445 levels on the upside and 11,270 levels on the downside on weekly basis.