Chartist Talk: Nifty may retest June peak; this aluminium stock could hit record high by September

The chances of the Nifty Consumption Index touching a record high by October look quite strong. The momentum across consumer stocks has steadily picked up, thanks to a supportive GST reform, healthy monsoon, and visible recovery in urban and rural demand. Technically, the index is in a strong monthly & a quarterly uptrend supporting the fundamental outlook.

However, as we are going up higher from these levels, one needs to be selective on stock picking. Overall index can encounter resistance around 13.000 levels which could lead to profit booking & retracements in some stocks.

Better strategy would be to look for a pull back to buy in order to have better risk reward. Some of the heavy weights in Nifty consumption index like Hindustan Unilever & ITC are pointing towards a more sideways momentum going forward. In contrast, Britannia & Nestle look set for a breakout. Right stock selection will be important.

Do you anticipate further strength in the Bank Nifty in the coming weeks, considering the technical and momentum indicators?

In the very short-term looks unlikely. Technical indicators, such as the RSI, are at 52 levels, which is historically associated with sideways movement. The 20 EMA on weekly too has a downward to flat slope suggesting weak trend.

One should wait for a decisive break of 55,400 levels for momentum to pick up. The daily ADX levels are hovering around 26 and weekly ADX levels around 19 further indicating sideways move.

Do you see the Nifty 50 reclaiming its June swing high within the next couple of weeks?

Yes, chances of Nifty 50 reclaiming the prior June high of 25,669 look quite probable. The weekly candlesticks are bullish, prices are trading decisively above the 20 weekly EMA after taking support. However, the highs may not sustain, if Nifty fails to have broader participation.

For e.g., if banking index continues to exhibit lacklustre momentum, which we expect it will, Nifty might quickly come under selling pressure from prior highs. One is also observing a Bollinger band squeeze in Nifty. A Bollinger band squeeze is traditionally associated with sideways & narrow range movement.

Do you expect the rally in Samvardhana Motherson International and Lupin to continue in the coming week?

The rally in both stocks seems to have strong legs.

For Lupin, recent US FDA approvals and pipeline exclusivity are expected to boost earnings. Valuations have become attractive following a 17% correction from all-time highs, and the company trades well below its historical average P/E.

Technically it is reacting from a weekly Bollinger band squeeze with a strong bullish green candle. The daily breakout supports the higher time frame price action. The stock looks set for a potential target of Rs 2,300 in the short to medium term.

Samwardhana Motherson, too, looks attractive. The stock is taking support at monthly 20 EMA with a series of positive candles. A breakout above Rs 108 levels with strong volumes can take the stocks to newer highs in short to medium term.

Do you believe Hindalco Industries can reclaim its record high before the end of September?

Hindalco is edging closer to its all-time high and there is a fair chance it could reach or even surpass that level before the end of September, looking at the strong momentum. Apart from the strong earnings momentum, technically the stock is sitting on the verge of breakout on monthly and weekly time frame.

A strong weekly close above Rs 766, can lead to renewed momentum in the stock indicating a fresh upside. Based on the measured breakout principle, the stock has a potential to reach Rs 950-980 levels post the breakout is confirmed.

Can the Nifty Auto Index hit fresh record highs in the coming weeks?

The GST cuts, stellar volume numbers from leaders like Maruti, TVS, and M&M, and a shift in consumer sentiment has triggered a powerful rally in most auto stocks. However, in the next couple of weeks, the index might retreat and show some profit booking at higher levels.

The index itself is trading near a strong weekly and monthly resistance. The weekly chart has given a candlestick, signal with a long upper wick indicating selling pressure at higher levels.

Unlike Hindalco, a immediate breakout in Auto index looks unlikely. Traders can wait for a pull-back for better risk reward opportunity.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.