Nifty midcap and smallcap indices left the Nifty behind this week. What does the chart predict about next week?
Nifty Midcap100 index has broken out of the flag pattern on weekly time frame alongside a Psar breakout in the monthly charts painting a positive outlook for the index in the medium term. Even though we expect big moves, a bit of caution is likely to prevail as the weekly RSI is suggesting that overbought region is in the vicinity.
In the case of Smallcap100, the reversal that started in July is aiming the monthly 61.8% Fibonacci retracement of the Jan’22 high and Jul’22 low. Overbought situations prevail here too, but patterns in weekly and monthly charts favour another 5% move in the index from current levels.
For Nifty Bank traders, what does the trade setup look like for the coming week?
The set up favours continuation of upsides for the following reasons. Two stocks, namely ICICIBANK and SBI which together weighs around 35% in the Nifty Bank index has done the weightlifting so far, with both of them 16% and 5.3% above their respective peaks seen in Oct/Nov. HDFCBANK which contributes 25.7% to index has been a laggard so far, trailing its record peak by 13.2%. Same is the case with Kotak Bank as well as Axis which trail their peaks by 7.7% and 4.8% respectively. In other words, there is plenty of catch that up can be seen from stocks other than ICICI Bank and SBI, which could give further legs to the Bank Nifty. Another reason that add reason to Bank Nifty optimists is that the present upmove, which is the third such attempt since markets came of the 2022 peaks, has gained 26% in the span of 84 days, both of which are longer than the previous two attempts. Lastly, the present move is replete with bullish continuation patterns, adding credence to the expectation that this run could get extended much beyond the record peak.
RBL Bank was among the top gainers in the week and rallied over 30 per cent in just 5 days. What’s behind the up move? What should be the strategy going ahead?
Unlike most other banks, which are still in a consolidation phase, RBL Bank has set off on a new uptrend. A fair price for the first move appears to be 130, which should attract consolidation or a pause. Those looking for an immediate entry may hunt for 124, and those willing to let the profits run, could place their downside marker at 117, and look for 150 in the next leg.
Which are the 3-4 stocks on your radar for the week?
View – Buy
Target – 3950
SL – 3660
The stock has seen a trendline breakout on daily charts and is on the cusp of witnessing Psar breakout, the momentum indicator MACD is about to cross the signal line and monthly charts are also showing signs of selling exhaustion. All these are favoring a positive move next week.
View – Buy
Target – 490
SL – 444
The stock has been making lower lows since April 2022. Today, it broke above the 20 DMA of 458 and closed above the Psar value of 438. Also, the daily MACD has crossed above the signal line indicating bullishness. In the weekly charts, a bullish engulfing candle pattern is formed supporting our bullish view.
View – Buy
Target – 350 – 370
SL – 314
The stock has broken out of the narrow range in which it was trading since the later part of August. Also, the MACD has turned positive along with a break of 20DMA and Psar pointing towards a positive outlook for the stock in the near term. In the weekly time frame as well, the MACD has crossed signal line and has turned positive favoring our bullish view.
View – Buy
Target – 405
SL – 360
The stock has broken out of the declining trendline resistance of 353 and the daily Psar of 363 indicating positivity in the near term. The trading volume has spiked above 45D average indicating renewed participation. Even as the longer time frame charts are telling a different story, we could ride the current reversal in the stock given the fresh buying seen across IT stocks.
PSU banks continued to rally in the week. In between the two – private banks and PSU banks – which ones do you like and why?
We prefer PSU banks for several reasons. Firstly, PSU Bank Index has broken above 2021 peak, suggesting strength. Secondly it is still way below 2015 peaks, suggesting lot of room for further upsides. Thirdly, more PSU banks show upside continuation patterns than those in the private sector, with a couple of which contribute heavily to the private bank index appearing very sluggish.
Nifty IT index also bounced back in the week by rallying 3.5 per cent. Do you think the up move is sustainable?
After being heavily bearish on the IT sector during the April-July period, by selling to the tune or around 35500 crore rupees, we have begun to see green shoots in August where they turned net buyers to the tune of ~400 crore rupees. Further, several of the IT stocks, especially from the mid cap space are showing reversal/ bullish continuation patterns, encouraging us to keep a positive bias in the near term.
First published in Economic Times.