Chartist Talk: Further major downside in Nifty hinges on 25,300 this week, keep Bharat Electronics on radar, says Rahul Ghose

Rahul Ghose is the founder and CEO, Octanom Tech and Hedged.in

• Gold looks extremely overbought on all time frames
• Seeing strength developing in Dollar Index
• Further major downside in Nifty hinges on 25,300 this week
• Keep Bharat Electronics on radar

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A break of 50 DEMA after 3 months has turned sentiments negative. If Nifty 50 sustains below this for a couple of days & if 25,300 breaks on weekly chart, a downside till 24,900/24,800 cannot be ruled out, Rahul Ghose, the founder and CEO, Octanom Tech and Hedged.in said in an interview to Moneycontrol.

He advised that one can keep Bharat Electronics on radar. "The stock looks a clear buy on pull back candidate with weekly & monthly charts bullish & no significant resistance on upside," he reasoned.

According to him, technically, the gold is extremely overbought on all-time frames. However, going forward, "we are seeing strength developing in Dollar Index. Dollar Index is at a one-month high level & historically gold tends to underperform in a rising dollar index environment," he said.

Do you expect the Nifty 50 to rebound this week, or can one more week of downside not be ruled out?

Nifty has just come off all-time highs near 26,350, and the last down day saw a clear negative close with more declines than advances, showing supply at higher levels.

The index is still holding above key weekly supports around 25,300, so the primary trend is bullish, but short-term sentiment has turned cautious, leaving room for another week of choppy to slightly negative action before a cleaner rebound.

A break of 50 DEMA after 3 months has turned sentiments negative. If markets sustains below this for a couple of days & if 25,300 breaks on weekly chart, a downside till 24,900/24,800 cannot be ruled out. On the other hand, any strong positive price action supported by good volumes, would make this a fake breakout. Watch out for 25300 levels in the current week.

What is your strategy for the Nifty in the coming week?

If we manage to close above the high of 25,940 (Friday's high) in the next couple of trading sessions, treat this as a false breakdown & consider long positions can. Short if Nifty slips below 25,300 levels for a target of 24,800.

From a technical perspective, which two stocks are on your radar for next week?

On a pull back Titan Company can be considered around the levels of Rs 4,070 to Rs 3,990. Considering the strong quarterly updates posted by gems & jewellery segment, the upside momentum in these stocks is likely to continue. Technically, too, the stock is in an unchartered territory, making all-time highs with RSI levels of 65 to 70 on weekly & monthly charts, suggesting more potential to go up.

In the context of current geopolitical situation entire defence sector looks promising. One can keep Bharat Electronics on radar. The stock looks a clear buy on pull back candidate with weekly & monthly charts bullish & no significant resistance on upside.

From a technical standpoint, do you think gold will continue to hold its shine in the coming weeks?

Technically, Gold is extremely overbought on all time frames (Daily, weekly & monthly). Rate cut expectations & the current geopolitical situations has kept the commodity in the upswing in the recent weeks. However, going forward we are seeing strength developing in Dollar Index. Dollar Index is at a one-month high level & historically gold tends to underperform in a rising dollar index environment.

Gold has a high probability of moving sideways or consolidate at current levels. One can look at dips as a buying opportunity, but at current levels the risk to reward does not look favourable. Rs 1,28,000 to Rs 1,25,000 per 10 gram would be a good level to look at on pullback which is 5-7% down from current levels.

Do you see more downside in Swiggy but not in Eternal for next week?

Swiggy is trading around the mid-Rs 350s after listing gains and subsequent volatility, with a still-loss-making profile and a relatively rich valuation, which leaves room for sentiment-led corrections.

Eternal, by contrast, is hovering near Rs 284 with only marginal daily moves and has just disclosed GST-related demands that the company intends to appeal; that kind of event risk can cause knee-jerk volatility, but after the immediate reaction much of the bad news can get priced in, making incremental downside less obvious. Eternal is better placed than swiggy fundamentally as well as from a technical stand point.

What is your outlook on IIFL Finance and SBI for next week?

IIFL Finance trades at a monthly resistance level currently. One should wait for close above the recent highs of Rs 679 for building fresh long positions.

SBI is one of the best and outperformer in public sector banking segment. However, in the recent run up the stock has become extremely overbought & a short term pull back cannot be ruled out.

IIFL Finance – one should be a little cautious & wait for a decisive breakout, while SBI is good candidate to buy on a pull back around Rs 820-800 band.