1) FIIs added net longs of 210k contracts in August in index futures vs 62k long contracts in July. How does the outlook for the September series look like given that Nifty ended up with a gain of 3.1% in August series?
Septembers are generally prone to profit booking especially if the two preceding months have had a rise of atleast 0.5% each. However a dragon fly candle formed in monthly chart points to bulls having upper hand as we enter September, having rejected several bear attempts, and broken free of their stranglehold, as is. Momentum indicators point to strength in trend, and could potentially pave way for large gains. Beyond the seasonality threats, we also have a reluctant 50 day SMA whose lag of 3.25% is close to historical extremes which should call for intermittent drops or several flat days before large gains could be seen. With this in perspective, we will have our eyes on 25365-25800 as the nearest upside objectives, while downside marker may be placed near 24800, a crack of which should see 24440 as the first downside objective.
2) In the previous series, short-covering was seen in HDFC Bank while long build-up trend was visible in ICICI Bank, Axis Bank and Kotak Bank. On the other hand, short build-up was seen in SBI. So going ahead, do you think long private banks and short PSU is a good bet?
ICICIbank, Indusindbnk and Kotakbank saw rising rollcost indicating more interest in pay more to add positions along with better rolls. In the same way, majors from the PSU segment saw falling roll cost along with fall in rollover numbers. With 14 month RSI in the overbought region and a reversal candle in the monthly time frame PSU Bank Index is indeed going to face headwinds this week. It does not necessitate shorts on the constituents as such, but private banks could indeed see more buying backed by gains in Icicibank, Axisbank, Indusindbnk and Kotakbank.
3) Defensives like pharma and IT are gaining traction and outperformed Nifty Bank in the week. How would you trade the banking index in the coming week?
Despite three weeks of green candles, retracing over 38% of what Nifty Bank lost from the Jul’s peak, MACD in weekly charts is yet to turn above signal line. However, other faster oscillators are pointing to continuation of strength, which we are inclined to pursue, aiming 51800-52000, but downside marker placed 51100.
4) Sugar and ethanol-related stocks were in heavy demand on Friday’s session. Do you see signs of the rally sustaining in the likes of Triveni Engineering and Globus Spirits in the week?
Ethanol themed stocks are on a long term trajectory already, and have gone through a series of bullish continuation patterns over the last few years. Triveni Engineering aims for 545 with the next burst while Globus Spirit is on an even bigger run with 1265 as the nearest objective. A word of caution here though as both have been trending higher for a while now calling for trading stop loss as a prudent measure for new entries, at 440 and 928 for Triveni and Globus respectively.
5) Give us your top trading ideas for the week.
BRIGADE (CMP:1204)
View – Buy
Targets – 1280/1340
Stoploss – 1145
The stock has been moving within a broadening wedge chart pattern since November 2023 and has bounced off the pattern’s support level of 1100 in August this year. The monthly MACD histogram has shown signs of exhaustion at lower levels hinting at an eminent pull back in the near term. With daily and weekly RSIs strong holding above 50, we expect the current reversal attempt to take the stock towards 1280 and 1340 in the next few weeks. All longs may be protected with stoploss placed below 1145.
First published in The Economic Times
