According to Milan Vaishnav, the CMT, MSTA, Founder and Technical Analyst of Gemstone Equity Research and Advisory Services, a major multi-month pattern support exists at 24,500 for the Nifty 50.
"If that stands violated, it would also translate into the Nifty breaking down from a larger symmetrical triangle formation on the higher timeframe (weekly) charts and could have deeper negative implications," he said in an interview to Moneycontrol.
Among stocks, he believes Maruti Suzuki India is currently in an overbought zone. In fact, "the stock has been in the overbought zone for a couple of weeks", he said.
Do your charts suggest that the rally in Netweb Technologies, which has surged nearly 13 percent each in the past two weeks, will continue—especially after the horizontal trendline breakout?
Netweb Technologies had a strong breakout when it crossed above Rs 2,300 in the beginning of this month. That translates into returns of over 67% in just in September. At this juncture, it would be prudent if investors consider booking/locking at least 50% of profits on this stock and then stay invested with the stop-losses trailed higher at Rs 3,300.
But for the new investors, I would suggest not chasing this upmove now; any fresh entry will come with a very unfavourably skewed risk-reward ratio. Since the trend is still intact, and there are no signs that signal any reversal, Investors may continue to stay invested after locking half of the profits.
Is Maruti Suzuki looking overbought now, given its consistent rally over the past eight straight weeks?
Yes, of course. Maruti Suzuki India is currently in an overbought zone. However, if you notice, the stock has been in the overbought zone for quite some time now, in fact, for a couple of weeks. It is also important to understand that stocks tend to remain in overbought territory for long if they are experiencing a strong trend.
Do you expect the Nifty 50 to decline another 200–300 points from here before making a strong rebound?
I would rather look at it in a different way. Rather than focusing on a short range of 200-300 points, I would keep a larger formation in mind that can impact, dominate or influence the trend over some foreseeable time.
A major multi-month pattern support exists at 24,500. If that stands violated, it would also translate into the Nifty breaking down from a larger symmetrical triangle formation on the higher timeframe (weekly) charts. If this happens, it could have deeper negative implications. So, we need to watch Nifty's behaviour against the level of 24,500 on a closing basis.
Do you think the rally in Bharat Gears, which has already gained over 50 percent this month, is just getting started?
Again, this requires to be looked at from a wider angle. Bharat Gears has been in a corrective decline since September 2022 after it formed a high of Rs 172. Over the past two weeks, the stock has attempted a strong trend reversal. In the process, it has dragged its support levels higher from Rs 85 to Rs 109.
So long as the stock stays above this level, the trend reversal attempt would stay valid. Some consolidation and minor retracement cannot be ruled out; eventually we can expect this stock to test prior highs over the coming months.
Do you expect a sharp rally in Torrent Pharma?
After the formation of a high at Rs 3,787, Torrent Pharma is under minor corrective retracement and stays in a falling channel, but largely in a defined range.
Based on the charts, which two stocks would you prefer to buy next week?
This time, my focus would not be just on absolute returns but on relative returns as we have some turbulence in the markets. Bharti Airtel and Larsen & Toubro would be my picks.
Bharti Airtel is attempting a breakout following a Bollinger Band squeeze that was confirmed by the Bandwidth at its lowest level.
Larsen & Toubro, on the other hand, has attempted a strong multi-month breakout by crossing above Rs 3700. Important to note here is that the Relative Strength (RS) line of both these stocks against the broader market is trending higher.
Do you think the decisive horizontal trendline breakout at 27,700 could open the door for a sharp rally in the Nifty Auto index?
The Nifty Auto Index is in a strong uptrend; presently, it is just seeing some mean reversion and corrective retracement after running ahead of its curve. A move above 27,700 would propel another phase of an upmove in this Index.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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