Newly-listed Ola Electric’s 75% rally from IPO issue price has caught both traders and long-term investors off-guard. Anand James, Chief Market Strategist, Geojit Financial Services, says. However, the timeframe is short to conclude whether the EV stock is now in an overbought zone, there are signs of positional trades being built systematically.
Edited excerpts from a chat:
1) Nifty has been largely stuck in a narrow trading range of 400-500 points for the last few days. After Friday’s upside, do you see signs of a fresh breakout on the upside?
We had gone in last week, with the expectation of achieving 24540, as long as downside marker of 23975 held. It took a week long wait to achieve the objective which saw multiple attempts to push higher being hammered lower. Incidentally none of such distribution led downsides failed to penetrate 23975 either, due to lack of momentum which was seen in week before last as well. VIX also fluctuated, ensuring that directional views suffered. But with VIX easing and momentum indicators strengthening, we are encouraged to drop our guard a bit and adopt a trend following approach in the coming week. However, our objective for the time being is limited to 24900 as 64% of Nifty 50 stocks are trading above 20 day SMA as opposed to 30% on Wednesday, while only about 53% of NSE 500 are now above this key SMA as opposed to near 30% on Wednesday. We are inclined to believe that next week could see a broad based revival in stocks, which may limit inflows into Nifty 50 stocks, potentially delaying the re entry into the 25k band.
2) Most of the upside in the market is being led by IT while banks are underperforming. Do you think the next leg of the rally could be led by Nifty Bank?
Despite the large strides in Nifty IT, we are at the cusp of larger upsides in the sector. Since being at a pivotal point, we will adopt a wait and watch approach for IT. Bank Nifty meanwhile is yet to clear the wall of worry, but has a long room for upside, given the low base, and not just because it has turned bullish. Significant challenges still remain, but for, we will look for a break beyond 50800 to play the potential for a 1200 point upmove. Inability to float above 51165 will be a weakening signal.
3) Inox Wind was among the top gainers of the week. How would you go about trading the stock in the coming days?
Declining volumes in the last the three days that followed a large jump in price as well as volumes, is a sign of declining enthusiasm. Since no outright bear signal is visible, we would be interested in declines to the low 190s with stop loss below 179 to re enter longs. But we feel it would be a while before we reclaim the 230 mark.
4) Ola has caught both positional traders as well as longer term investors off guard. Although it is a very short timeframe, would you hazard a look at the chart and tell us whether the stock is at overbought level?
That is right, the stock has been in the hands of traders for too short a time frame to give us signals towards overbought conditions. Volume patterns are suggestive though. Daily volumes have been on the decline since the first day, while intraday volumes are also seen tapering through the day. This does not suggest a FOMO trade. But we do see signs of positional trades being built systematically. We will get a better picture next week as broader participation across stocks is expected, with risk appetite improving.
5) Sugar stocks are in focus as the government is said to be considering hiking the price of ethanol. And then we also have the Maharashtra assembly election coming up. Which sugar stocks are looking attractive from a trading play perspective?
Dalmia sugar, Triveni Engineering and Balrampur Chini are looking bullish in the short term.
6) Give us your top trading ideas for the week?
Birlacorp (LTP: 1287)
Target – 1385
Stoploss – 1189
The stock has been on a decline since the beginning of June 2024. in the last two weeks, we have seen a consolidation and an attempt to reverse. MACD has shown signs of exhaustion at lower levels in weekly charts and weekly RSI is around 30 as well. We expect the stock to move towards 1355-1385 in the next few weeks. All longs may be protected with stoploss placed below 1189.
GHCL (LTP: 631)
Target – 690
Stoploss – 593
The stock has been moving within a Flag pattern since June 2022 and has seen a breakout this month. Also, the monthly MACD is about to break above the signal line hinting at further upside in coming months. On a conservative basis, we expect the stock to move towards 690 to 710 in the next few weeks. All longs may be protected with stoploss placed below 593 levels.
First published in Economic Times