For Nifty, 12065 remains a strong headwind above which the move towards 12146 followed by 12416 could be a quick affair while a decisive weekly close below 11580 would dampen the bullish sentiment.
The level of 12,065 remains a strong headwind above which the move towards 12,146 followed by 12,416 could be a quick affair while a decisive weekly close below 11,580 would dampen the bullish sentiment, Sacchitanand Uttekar, DVP – Technical (Equity), Tradebulls Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Q) Nifty breaks below 10-Day winning streak but then picked up momentum on Friday. What led to the price action on D-Street?
A) The sharp fall on Thursday’s session was primarily triggered due to deep cuts in the European indices which reacted negatively on the second COVID-19 wave fears post the news which hit the wires with regards to strict implementation of lockdown measures in London.
Also, being a weekly expiry session at the mid-point of the series, there was a quick reaction by traders to optimize this opportunity.
The end result was the breaking down of the ongoing 10-day bullish sequence where the index never closed below its prior days low. Despite the sharp price cut the index lacked fresh short positions, and hence the panic looked temporary in nature.
The indices formed an ‘Inside Bar’ formation on the final day of the week, resurrecting from its panic lows.
Q) At a time when Nifty50 was surpassing crucial resistance levels, small & midcaps underperformed in the week gone by. Are investors booking profits after the recent rally seen in the broader market?
A) The benchmark indices rallied in the last few days but there were no significant moves within the small and midcap stocks.
Since the sharp single-day decline on 31 Aug 2020, the Nifty Midcap 100 index has been oscillating within a confident range of 16,500-17,500 with no signs of weakness, and we have seen a similar movement for the Nifty Smallcap 100 index.
After nearly 7-8 weeks of consolidation, both the indices are placed at a significant make or break junction where they could regain their limelight.
As the economic activity is getting back to normalcy, Mid-cap and small-cap space are likely to benefit once the economy recovers fully, and demand returns to normalcy.
Earnings season could play a vital role to kick start this anticipated momentum & help the indices breakout from their ongoing consolidative range.
As liquidity remains high due to attractive interest rates domestically as well as globally, we could again witness this liquidity chasing high growth stocks as the COVID-19 situation in India remains much better as compared to the globe.
As witnessed recently, another prime reason behind the rally in midcap and smallcap from their respective recent base was buying from multi assets funds to allocate more exposure according to SEBI norms.
Now market participants are just playing safe and betting where there is more certainty of earnings. With the second wave of infection increasing in Europe, foreign investors need clarity on the shape, strength, and speed of the recovery before they invest in mid and small-cap space.
Hence, it would be an interesting time soon for the broader market at large once the conviction curve rises with more clarity.
Q) Sectorally, Banks and IT stocks hogged the limelight. What led to the price action in those sectors?
A) After a prolonged underperformance Banks have finally started performing along with the benchmark index; the index had been severely underperforming before due to the discrepancy related to its moratorium issue.
The forthcoming Supreme Court verdict should remove the uncertainty factor surrounding banking stocks and we can expect some clear direction in Nifty Bank Index thereafter.
The banking sector is right now one of the best-valued sector and is still 30 percent lower from its 52-week high compared to Nifty which is just now merely 7 percent away from its 52 weeks high.
WFH seems to have led to significant cost adjustments for most of the IT companies across the globe. On top of it when these companies are announcing salary hikes and increment, it means they have an expectation of higher revenue in the future which is giving confidence to the market.
Domestic fund managers are favoring the larger IT companies after strong results and management’s commentary. Buyback announcement by some of the top IT companies has served as an icing on the cake which added further zeal to its ongoing bullish sentiment.
Q) Which are the important levels or events that investors should watch out for in the coming week?
A) For Nifty, 12065 remains a strong headwind level above which the move towards 12146 followed by 12416 could be a quick affair while a decisive weekly close below 11580 would dampen the bullish sentiment.
As there is no significant reversal candlestick formation on its weekly scale, with its weekly RSI placed at 60.50 along with ADX placed at 24 is a good sign for the momentum to unfold as the trend strength indicators remain far away from their respective overbought territories.
For Midcap100 the range stands valid until the indices oscillates within the said range of 16100-17500 while the Nifty Small-Cap index is placed on a verge of breaking above its 200 Weeks EMA placed around 5940.
Though the main event trigger for banks & most of the rate-sensitive remains the SC verdict on the ongoing loan moratorium issue, but the results announcement by HDFC Bank over the weekend followed by HDFC Life Ins. would stimulate some action within the banking & financial stocks.
The results reaction could be a significant yardstick for the participants to assess their expectations for their peers.
Q) What would you advise Robinhood investors? D-St already touched highest Mcap of about Rs 161 lakh cr while Sensex, and Nifty are still short of hitting record highs. This might have created the environment of a pause or a fall in the near term?
A) ‘Markets have always rewarded the one who exercises patience & is prepared in advance for any adversities’. This remains a fact which the new millennia traders & investors should know in advance as market trends /phases remain evolving with times & are never constant.
Bull trends are always fused with strong sector rotational moves. The upcoming US elections is the big event that always keeps the global markets under check as volatility creeps in during the final legs of campaigning until the declaration of its result.
Hence, a likely pause or pullback in the near-term cannot be ruled out until US elections get over. The concern is that midcap and small-cap have not participated as much as large-cap, indicating shifting of liquidity.
The bias still is positive and we may end this year on a positive note but looking at a recent rally, it is better to trim some of the positions especially from the overbought sectors.
Sector rotation will come into play as participants flock into leading sectors which could continue their outperformance as there is always a fear of losing out by participants.
But, sectors like IT & Pharma which have been the flag bearers of the current rally are now looking stretched.
While rate sensitives like Private banks, Auto and auto ancillary might perform looking at festive season & high liquidity infusions.
Q) Any 5-6 short term trading ideas by experts for the next 3-4 weeks?
A) Here is a list of top 6 trading ideas for the next 3-4 weeks:
HDFC Bank was the first to uplift the spirits within the banking names as the index was at a crux of a rebound. The ‘V’ Shaped recovery in the past 2 weeks has been significantly fuelled up with volumes as it managed to surpass and sustain above its previous resistance zone of Rs 1150.
Though the stock did witness a pullback along with the indices the result announcement could re-establish its bullish momentum once above Rs 1225.
The pattern indicates a price target up to Rs 1300 which could be participated with fresh longs with a trading stop below Rs 1138.
Since the last 9 trading sessions, the stock has been oscillating near its 200-DEMA zone. Its options data indicated strong bounds been placed at Rs 370-400.
The recent rebound from the lower bound of this range remained significant as it managed to close the current week above its 8-Days swing high along with a significant jump in its daily RSI to 57 from 46 in just a single day.
Even on the weekly scale, the stock has already established a ‘Bullish Harami’ pattern couple of weeks back which was awaiting confirmation.
With the pattern now confirmed the corrective wave seems to have terminated as bullish momentum seems re-established on the final day of the week.
Traders could accumulate up to Rs 387 for an initial up move towards Rs 422 (78.6% retracement of its prior down wave) with a stop below Rs 379.
The stock is now in close proximity to its support range, the occurrence of a ‘Spike’ on its weekly scale is an early indication of the same. On its daily scale it had been oscillating lower but within a ‘Falling Wedge’ formation.
Usually, this pattern marks the termination of the declining move & arising signs of a fresh bullish trend.
The short-term, as well as long term investors, should accumulate the stock from hereon as a folio buy. Momentum traders should add aggressive longs once above Rs 835 with a stop below Rs 805 for a pattern target up to Rs 910.
After 8-weeks of a sharp decline, the momentum seems to be getting attested as the stock holds above its long-term support average placed around 400.
Even on its daily scale, there is clear evidence of positive divergence on the daily RSI, which is an early sign of a trend reversal.
The latest ‘Homing Pigeon’ formation on its daily scale needs affirmation which could set the bullish tone once above Rs 415. Trading longs could be considered once above Rs 415 with a stop below Rs 398 for a strong short-covering based move beyond Rs 450.
On the daily scale, the ongoing bullish ‘Flag’ formation looks mature for a breakout. The recent ‘Engulfing bullish’ formation reconfirmed the 20-Days EMA support while it also holds steady above its 20 WEMA level.
Positional longs should be still considered with a trailing stop below Rs 1,148 even for an immediate target up to Rs 1250.
Blue Star has been oscillating well within its ongoing symmetrical triangular formation. The recent rebound from the Rs 605 zone not only confirmed the pattern support but also reaffirmed the strength of its 200-Days EMA.
Volume action during the week gone by has been significant as compared to its last 3 weeks. Proximity towards the base of the pattern provides a good reward to risk opportunity for fresh positional longs as the pattern resistance is placed around Rs 685. Long positions should be maintained with a stop below Rs 605.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.