Chartist Talk: Close above 25,000 crucial for sustainable rally in Nifty 50, these 2 stocks look overbought now, says Rahul Ghose of Hedged

Markets on Wednesday had a decent pullback, but it's too less evidence to think this could be a start of renewed optimism and index could breach June highs. Overall, the daily and weekly timeframe trend continue to be in a sideways band. There is no clear direction as far as Nifty is concerned.

The strong green candle on Wednesday can quickly meet with selling pressure at higher levels looking at the current chart structure. A close above 25,000 should be watched out for if this rally has to continue.

What is your trading strategy for October?

One can play the sideways market & focus on quick in-quick out without expecting high risk to reward. Move towards 24,950-25,000 would be a good opportunity to enter short for short-term traders & 24,400-24,440 would be a good level to enter long. Breach of these levels can be used for breakout trades in either direction.

Has the Bank Nifty gained enough strength for a move toward the 56,000-57,000 zone in the coming weeks?

Bank Nifty has closed with a nice morning star pattern on daily time frame & an equally bullish candle on weekly. However the index is trading in a triangle formation with the upper boundary of triangle at 55,835. A break of that can surely take the index towards the levels to 57,000 in the short-term. Alternatively, the index would continue to trade in 55,800-54,800 range if the breakout fails to happen.

Would you recommend buying Tata Motors, which staged a strong single-day rally on Wednesday?

Tata Motors’ impressive rally on Wednesday can be traced directly to the buzz surrounding its demerger, which officially took effect on October 1. The stock surged over 5 percent, supported by robust trading volumes.

For investors, the stock looks well-positioned due to its ongoing transformation, focus on electric vehicles, and value unlock from the demerger. The stock is consolidating around quarterly 20 moving average with a series of bullish candles suggesting a good entry point.

From a trading perspective, one should wait for levels of Rs 745 to surpass, as the stock has had a sharp fall from this level in previous few occasions. Above Rs 745, the stock looks set for higher targets.

Is there significant room for further upside in Sammaan Capital, which gained 23 percent this week?

Sammaan Capital just broke out of an inverse head-and-shoulders pattern, the targets of which have already been achieved. On bigger time frames like quarterly, the stock is showing signs of creating a base with multiple bullish & lower wick candles.

After such a steep rally a stock gets overbought and tends to consolidate sideways before the next leg of rally. One should wait for a pull back in the stock towards Rs 150-155 levels. This prior resistance in the stock can now become a strong support. Fundamentally, too, business is continuing to show progress. Best to have a buy on pull back strategy.

Is Netweb Technologies overbought?

Netweb Technologies is displaying classic signs of having entered overbought territory after a spectacular run with the stock more than 80 percent in just one month and over 170 percent in six months, closing at an all-time high of around Rs 4,108 on October 1.

Technical indicators such as RSI (Relative Strength Index) and MFI (Money Flow Index) are registering elevated readings. Fundamentally, too, the valuations are at an elevated levels making the stock not a good buy at or near CMP.

What are your top 2 picks for the October series?

Kotak Mahindra Bank

Technically, the stock rebounded from support near Rs 1,970 with momentum picking up; charts indicate possible upside towards Rs 2,120–2,180 given a breakout above recent consolidation. Plus, the stock is giving nice bullish candlestick signal at monthly 20 EMA.

L&T Finance

Technically, the stock reached an all-time high this week, trading well above all key moving averages, showing robust trend strength and sector outperformance.

While Kotak Mahindra Bank can be considered at current price, while L&T Finance is classic buy on pullback candidate.

Do you expect horizontal trendline breakouts to signal a sharp rally in the Nifty Auto and Metal indices?

Both Nifty Auto & Metal look poised for a further rally.

Technically, the Nifty Auto index has breached above 27,700 recently, signaling a range target of around 35,000-36,000 based on measured target principle. Fundamentally, tailwinds from festival demand, stable interest rates, and robust sales numbers for leaders like Tata Motors and M&M support further upside if breakouts hold.

Nifty Metal index is on the verge of a symmetrical triangle breakout with bullish candlestick patterns suggesting a breakout above 10,322 levels. Fundamentally, global commodity cues, renewed capex, and steady Chinese demand recovery will act as a major catalyst.

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