Chartist Talks: Avoid Paytm for next two weeks, upward move likely to sustain in Escorts, says Sudeep Shah of SBI Securities

While the sentiment had turned bearish post Nifty forming a Bearish Engulfing candlestick pattern on the daily scale in the previous week, sustained follow-up selling pressure from higher levels has led the index to correct by nearly 2 percent for the week and ended below the 22,100 mark. Also, sustaining below 22,140 has led Nifty to witness a rising channel breakdown on the daily scale.

In addition, the Index has slipped below its 20 and 50-day EMA (exponential moving average) levels which have started to edge lower. Further, the rising slope of 100 and 200-day EMA has slowed down significantly, which is a bearish sign.

While the momentum indicators are displaying bearishness, even the market breadth is not encouraging. Most noteworthy, among the constituents of the Nifty index, 60 percent of stocks are trading below their 20-day EMA level. Last week, 42 percent of stocks were trading below their 20-day EMA level. This clearly indicates marked breadth has weakened significantly as compared to prior week.

These technical factors clearly indicate that the index is not yet out of the woods. However, we believe, the zone of 21,700-21,800 (March & April 2024 Swing lows) will be the crucial support for Nifty. Any sustainable move below the level of 21,700 will lead to further selling pressure in index upto 21,470, followed by 21,300 in short-term. While, on the upside, the 50-day EMA zone of 22,200-22,250 is likely to act as immediate hurdle for the index. Above 22,250, Nifty could witness short-covering upto 22,480-22,530 levels.

Is the Escorts Kubota looking overbought now?

As the stock is trading at an all-time high, all the moving averages and momentum-based indicators are suggesting strong bullish momentum in the stock. It is strongly outperforming the frontline indices since the last couple of trading sessions. The daily RSI tested the overbought zone of 80 in the first week of May and thereafter it has witnessed minor cool-off.

However, according to the RSI range shift theory, it remains in a super bullish zone. Thus, we anticipate the stock will likely sustain its upward trajectory as long as it remains above the Rs 3,400-3,380 level. In the short term, it's poised to test the Rs 3,650 level on the upside.

Has the Paytm bottomed out?

We see this as more of a "dead cat bounce" scenario. The stock's major trend remains bearish, as it is currently trading 68 percent below its crucial 200-day exponential moving average (EMA) level. Momentum indicators and oscillators further reinforce this strong bearish momentum.

Given these factors, we advise avoiding this stock for the next couple of weeks.

Do you see the Bank Nifty breaking down the lower end of the rising channel?

Bank Nifty has resisted near the upper trendline of the rising channel in the last week of April and thereafter it has witnessed sharp sell-off of over 5 percent. Currently, the index is trading below its 20 and 50-day EMA levels. These averages are in falling mode.

Most noteworthy, the daily RSI (relative strength index) has given upward sloping trendline breakdown on the daily scale. This indicates bearish momentum in the index.

However, post a 5 percent correction in the previous 6-7 sessions, we believe, the zone of 46,950-47,100 will act as crucial support for the index as it is the confluence of the 100-day EMA level and lower trendline (demand line) of the rising channel. Any sustainable move below the level of 46,950 will lead to an extension of correction up to the level of 46,400 in the short term. While, on the upside, the resistance has shifted lower in the zone of 47,900-47,950 level.

Are the charts saying the correction is done in the Nifty Midcap and Smallcap indices?

Despite the selling pressure observed in frontline indices, the Nifty Midcap & Smallcap Indices exhibited signs of a potential reversal on Friday. Both indices displayed the formation of a Hammer candlestick pattern on the daily scale, suggesting limited downside potential at this point.

Talking about levels, for Nifty Midcap, the zone of 48,700-48,600 will act as crucial support for the index. As long as it is trading above 48,600, it is likely to witness a pullback rally up to the level of 50,200 in the short term. While, on the downside, any sustainable move below the level of 48,600 will lead to resume its southward journey.

For the Nifty Smallcap index, the zone of 15,800-15,750 will act as crucial support for the short term.

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