1) Nifty’s overall chart pattern is maintaining a bullish overtone. How big is the resistance at 19,500-mark?
The consolidation phase that we have been in the last 2 weeks could be viewed as time correction, having run swiftly and persistently since March. The 19500 mark, hence was seen less of a resistance. Further, this phase was dominated by major news flow in two Nifty heavy weights, namely HDFC Bank and Reliance, which as muddied the technical views on Nifty, as rebalancing and rerating impacting chart based set ups. The move away beyond 19500-19380 band will however give control back to chartists, setting new directional plays. VIX under 11 has given a calm to upside views, but we expect this metric to see upticks once 19660-750 band is seen.
2) What should be the trading strategy for Nifty Bank traders? Will it continue to underperform?
Though Nifty Bank saw a new peak earlier than Nifty 50, the moves since then, had hardly evoked confidence or reflected a secular bull run, that was widely expected. Though collapse fears never turned real, as major dips in last two months always found solid buying interest, the index traders have certainly persistently shown disinclination to chase prices higher. The hot and cold approach from HDFCBANK has been one reason, and we will await its Q1 numbers, before taking a directional call on the index. That said, Friday’s hammer close suggest that a 5 day downtrend is likely to be reversed.
3) IT stocks have been a surprise this week. What’s your prediction looking at the Nifty IT chart? Which is the best placed stock for the new week?
IT stocks were upbeat this week tracking uptick in global IT stocks which rallied on the back of easing US inflation. Also, better than expected order inflow data from TCS, which contributes 45% to the NSE IT index, added to the momentum.
From the Largecap space, we are upbeat on Wipro. An inverted Head & Shoulder pattern is maturing in the daily time frame and we expect a breakout soon. Also, in the monthly time frame, the stock has bounced off the 61.8% Fibonacci retracement level of (April 2020 low and September 2022 high) 377 and is attempting a bounce back. We expect the stock to move towards 425 – 440 levels in the next couple of months. All longs may be protected with stoploss placed below 378 levels.
4) HDFC Bank is announcing its quarterly result on Monday. Given the past trajectory, what should be the best trading strategy for the stock on Monday before the results are announced?
HDFC Bank, has always remained a mainstay in long term portfolios, but traders find indifferent returns, especially around results announcements. A look at at the past five occasions of Q1 numbers will show that on all but one occasion, which was last year when we saw a 5.3% return, the average return in the 10 days after results announcement was -5.55%. And on all three occasions when there was a positive return in the 10 days running upto the results, the next 10 days gave a negative return. With HDFC Bank gaining 0.47% in the last 10 days, we are going in next with odds highly in favour of the stock slipping into the red. The 2 standard deviation support is seen at 1587.
5) Mazagon Dock has been the top gainer with about 26% rally in a week. What are the targets?
We have been leaning towards to extending the upside view of the Mazagon Dock, one of our Muhurat picks, towards 2200 to 2600 levels, but the formation of an Evening Star candlestick pattern, suggest that the rally may be losing steam. This calls for pull back towards 1440 atleast before bulls attempt to regroup. All re entries on dips may be protected with stoploss placed below 1270 levels.
6) Give us 3-4 stocks that are looking overheated now and are ripe for sell. (Rationale, TP and SL)
WELENT (CMP: 232)
Entry range: 232-237
Target: 221 – 214
The stock has been on an upside since April 2023 and the Flag pattern formed during June saw a break early in July resulting in a 20% upmove. This move has brought the stock into the overbought region (14-D RSI @ 75, weekly RSI @ 82). A Shooting Star candle pattern in the weekly chart and exhaustion seen in MACD forest in the daily time frame indicates possibility of a pull back in the near term. We expect the stock to move towards 221 and 214 in the near term. 246 may be used as an exit point for short positions.
M&M (CMP: 1546)
Entry range: 1545 – 1560
Target: 1510 – 1480
The stock has been moving within a rising trend channel since April 2020 and has been making higher tops and higher bottoms. After touching the channel resistance of 1595 this week, the stock has shown signs of exhaustion with 14-Day RSI at 72 and MACD forest showing exhaustion candles in the daily time frame. Also, the stock has broken below the rising trendline support of 1563 on Friday indicating more short term pull back. We expect the stock to move towards 1510 and 1480 in the next few weeks. 1596 may be used to exit short positions.
First published in The Economic Times