Bounce back on cards! 90% of auto stocks are still trading above 200-DMA

0
581

Once selling eased in Nifty50, after coming close to 200-DMA, an upswing evolved in the broad market, helped by relief rallies in Adani group stocks, as well as other related segments and stocks which had sold off on fearing exposure to the group stocks.

Auto stocks look to have been consolidating and are gearing up for an uptrend. More than 80% of the stocks are having their 14D RSI between 50 and 60, indicating strength,” says Anand James, Chief Market Strategist at Geojit Financial Services.

In an interview with ETMarkets, James said: “90% of auto stocks are still trading above the 200-DMA and around 50% f the stocks are close to 1.5% near week’s low favouring a bounce back.” Edited excerpts:


A volatile week for Indian markets – benchmark indices closed flat. What led to the price action?
Once selling eased in Nifty50, after coming close to 200-DMA, an upswing evolved in the broad market, helped by relief rallies in Adani group stocks, as well as other related segments and stocks which had sold off on fearing exposure to the group stocks.

Positive reports on some of the group companies, RBI’s report on banks, etc. also added to this upswing. This upswing, however, lost momentum after Nifty came within touching distance of the budget high of 17,971.

Further, through the week, rate rhetoric turned incrementally more hawkish, driven by firm US jobs data.

This ensured that, while Nifty pushed higher, until stalling on Friday, the trading range became narrower, with VIX falling below 13.

Where are markets headed in the coming week? What are the levels which one should track for Nifty and Nifty Bank?.
The rejection trades that unfolded after peeping close to the budget high prompt us to open the week on a cautious note.

We were looking for a push beyond the same to extend the ongoing uptrend’s target to 18300, but will be looking for a performance near 17795 before playing the same.

However, downside moves may not gain momentum unless below 17580.

Meanwhile, Bank Nifty appears more positive, and we are inclined to play a 42700 move unless 40750 gives away.

Some traction was seen in the Small & midcap space. What led to the price action?
Q3 earnings played a major role in driving Midcap space this week. Better than expected earnings numbers from VBL, AWL, 

Cummins India and the expectation of better results from Policy Baazar and ABB

 on 10th Feb, which commands higher weightage in the NSE Midcap 150 Index, drove the midcap segment this week.

Smallcap segment remained vibrant this week ahead of the MSCI quarterly review. 23 new stocks were added to the MSCI India Domestic Smallcap Index, with more than 50% gaining an average of 8% this week.

Any strategy on stock or an index that traders can deploy in the coming week?
Auto stocks look to have been consolidating and are gearing up for an uptrend. More than 80% of the stocks have their RSI between 50 and 60, indicating strength.

Also, 90% of stocks are still trading above 200 DMA, and around 50% are close to 1.5% near the week’s low favouring a bounce back.

The daily chart is drawing up a consolidation with a short body candle near a declining trendline resistance with the growing possibility of an upside breakout. The Nifty Auto Index could be led by Hero MotoCorp, Maruti Suzuki, TVS Motors, and Tata Motors.

Paytm rose more than 20% in a week post results. What should investors do – buy the dip, hold, or book profits? What is fueling the rally, and what are the charts telling?
Markets have given a thumbs up to the stock, driven by the results, which have not only positively surprised their own guidance but has sought to dispel a lot of doubts on the stock, which had plagued fintech in general post their IPO not long back.

Charts point to a temporary pause followed by accumulation in the 630-580 regions before resuming an 800 trajectory.

Any value buy which you have spotted in the recent fall seen in markets that investors can keep for medium to long term (6-12 months) and why?
Here are a few trading ideas

PEL: Buy | LTP Rs 891
The stock has been on a decline since October 2021 and has been making shorter consolidation candles in the monthly time frame close to the 61.8% Fibonacci retracement level of the March 2020 low and October 2021 high (825) and the MACD forest in the monthly time frame has seen bullish exhaustion around the key Fibo level.

Also, it is moving within a triangle pattern in the monthly charts and is trading close to the lower trendline support of 840, confirming the attempt to reverse.

Zensar Technologies

The stock has been in a downtrend since November 2021 and has been moving within a rising trend channel since 2019 in the monthly time frame.

Currently, the stock is trading close to the rising trend channel support and attempting to reverse. Also, the monthly MACD forest has seen exhaustion at lower levels supporting the current attempt to reverse it.

In the weekly time frame, it has comfortably closed above the Psar value of 242, supporting our view of a strong reversal. The monthly Psar value is also near the current levels and a break of which could catapult the upside in the medium term.

First published in Economic Times.

LEAVE A REPLY

Please enter your comment!
Please enter your name here