Honasa showing signs of peak fear after losing 39% in 1 week: Anand James

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Chief Market Strategist Anand James

A near marubozu candle on Friday suggests that fear is peaking in Honasa shares, which lost 39% last week, says Anand James, Chief Market Strategist, Geojit Financial Services.

“The downtrend is now aged 49 days with a cut of nearly 60% from the top, with the last four days alone seeing nearly 40% cuts. Thus, even though we could not spot any reversal signs as yet, the age of the downtrend could attract bargain buyers,” he says.

Following Friday’s rally, what’s your plan for the monthly expiry?
Though last week completed eight instances of lower highs on the trot, the bounce off the 50 SMA and the close thereafter above the lower Bollinger band, both in weekly charts, hints at the revival of animal spirits. Friday’s rise of 2.39% also marked the highest single day rise since July 2024. Until then, the downtrend since 27th September had lasted 36 days resulting in a drawdown of 11.4%. When put in this perspective, Friday’s leap could be seen as a relief rally. So the question is one of sustenance of strength. We feel that the performance near 24030 could decide whether the present move could fizzle out into a dead cat bounce or not. A close above the same could set 25262 as the likely short term objective, but with stiff intermediate challenges at 24420 and 24770.

Now that Nifty Bank is available only as monthly contracts in the derivative space, where do you think the interest is shifting towards – Nifty Bank monthly expiries or Nifty weeklies?
Our sense is that Nifty Bank could remain the main alternative as it offers a thematic play as well as a mobility, thanks to lower number of constituent stocks as opposed to either Nifty or Sensex.

Do you think trader’s interest in Sensex weeklies has increased after the new Sebi rules have come into effect from November 20?
Some of the new SEBI rules are risk management in nature, majority of which are effective only in 2025. The ones that have come into effect from November 20 are lot size changes and removal of Nifty Bank weekly which brings Sensex an attractive option to shift in terms of volatility and lot size, when compared to Nifty. Lot size changes will be effective only for new contracts, hence it is too early to gauge the impact. It will not be a like for like shift anyway, as Sensex is a broad market index just like Nifty, and volume profile is very different from Bank Nifty. Volumes on Sensex so far have been volatile with the highest participation seen on Friday, with the rest of the days attracting significantly lesser interest.

Paytm shares ended the week 17% higher amid investor optimism around growth. How does the charts look like? Will the rally sustain?
A bullish engulfing pattern in weekly charts suggests bullish continuation, but we have already moved significantly away from key moving averages. This raises the prospects of a mean reversion move or a time correction on approach to Rs 998, last year’s peak.

Honasa has been falling non-stop ever since it released its Q2 numbers. Has the dip been strong enough for traders to make a quick buck if there is a recovery ahead?
The collapse that has not even respected the listing price is yet to give any signs of turnaround pointing to further falls. However, what might work in favour for the stock is the fact that, while the dramatic falls unfolded only during the last four days a downtrend has been in play, albeit at a much slower rate even before Nifty began the climb down from its peak. The downtrend is now aged 49 days with a cut of nearly 60% from the top, with the last four days alone seeing nearly 40% cuts. Thus, even though we could not spot any reversal signs as yet, the age of the downtrend could attract bargain buyers. Additionally, a near marubozu on Friday suggests that fear is peaking.

Give us your top ideas for the week.

Buy HGINFRA
CMP – 1279
Target – 1388
Stoploss – 1224

The stock has been declining since July 2024 after reaching an all-time high. It has corrected to the 61.8% Fibonacci retracement level of the July 2024 high and the December 2023 low. The MACD histogram and SMIO on the weekly charts indicate exhaustion, suggesting a potential reversal. We anticipate the stock to move towards 1,388 in the next few weeks. All long positions should be protected with a stop-loss placed below 1,224 levels.

Buy JAMNAAUTO
CMP – 100
Target – 115
Stoploss – 94

The stock has been trading within a falling wedge pattern since July 2024 and recently bounced from the lower boundary of the pattern, suggesting a potential reversal. The 14-day RSI is recovering from the oversold region, and the MACD histogram indicates exhaustion at lower levels, supporting our reversal outlook. We anticipate the stock to move towards 115 in the near term. Protect long positions with a stop-loss below 94.

First published in Economic Times

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