ITI Ltd shares, which ended the week 39% higher, can see more upside with targets going up to Rs 455-495 with stop loss at either Rs 407 or Rs 355, says Anand James, Chief Market Strategist, Geojit Financial Services.
Edited excerpts from a chat:
1) Following the heavy buying seen on Thursday expiry day, how has the bullishness improved in the market and what are the targets you have for the coming week?
The vertical rise on Thursday, provided a clean break out beyond the consolidation that persisted in the previous nine days, encouraging us to look forward to reclaiming 24770. However, the near 50% retracement of those gains on Friday has put the trend evenly poised. What has put doubts in our mind is the fact that while 68.6% of Nifty 500 constituents pushed above Thursday’s high, only 43.2% of them managed to close above the Thursday’s close on Friday. In other words, 37% of stocks that pushed higher than the previous day, surrendered the gains. This brings in caution back, but we will persist the 24770 view, as long as above 23900/860. Slippage past the same could see 23750 attracting prices lower, but favoured view does not see a collapse right away.
2) Nifty ended the week xx% higher but both IT and banks underperformed. Do you scope for gains in Nifty IT and Nifty Bank if the positive momentum sustains in the market?
Nifty IT Index has closed for this week and has held the trendline support of 42490 which could one reason why we should give IT index the benefit of doubt going into the earning season. Apart from that, a long legged Doji candle in weekly scale which happens to be close to the 61.8% Fibonacci retracement level of 42300 offers support in the near term. A change in the bullish construct would happen if 42300 if taken out decisively. Expect TCS, Infy, Hcltech and LTIM to lead the expected pull back in the IT index.
In the case of Banknifty, it has been moving within parallel trend channel since June and continues to be within it. Even though BankNifty is trading close to the lower extremity of the trend channel in the daily charts, the monthly MACD has broken below the signal line hinting at bearishness but we will wait for a confirmation in the shorter time frames before confirming the same. However, as the major index constituents like HDFCBank, ICICIBank and SBIN are hovering close to their respective trendline supports, we would bet for a bounce back in the near term towards 53000-53370 and review our view if Banknifty breaks below 49750 levels.
3) ITI Ltd has been the biggest BSE 500 gainer in the week. Is it time to book profits or the charts indicate more steam left in the trade?
Despite the vertical rise on Friday and overbought oscillators, a cup handle breakout that followed a series of bullish continuation patterns, encourages us to pursue more upsides, with initial eyes on 455-495. Downside marker may be placed at either 407 or 355.
4) Easy Trip Planners shares fell xx% in the week on the back of negative news flow. Do you see some consolidation ahead?
5) As the Q3 results season begins in the week ahead with TCS announcing its numbers on 9th, any particular stocks that would be on your radar in the earnings season?
We have not had as strong a December as is usually the case, but the opening week of January has lifted spirits and has prompted us to look at sectors that have seen the most beating in the last quarter, thus providing a low base as earnings flow in. Autos usually struggle in January, but we have seen a steep cut of 15.5% in the last quarter encouraging us to keep it in the radar. IT meanwhile has shown strength amidst last quarter’s carnage, largely dominated by a handful heavy weights, which hence will limited upside.
6) Give us your top ideas for the week.
LXCHEM (CMP – 243)
View - Buy
Target - 264
Stoploss - 235
The stock has been making lower tops and lower bottoms since September. Currently the stock is attempting to take support near the previous swing low of 240 from where a bounce is underway. The 14 day RSI has broken above the RSI moving average and MACD is about to move above the zero line indicating short term momentum. We expect the stock to move towards 264 in the next few weeks. All longs may be protected with stoploss placed below 235.
