Ashish Kyal, CMT, founder and CEO of Waves Strategy Advisors, states that we can anticipate a decrease in prices towards the previous support area of 21,530 levels on the Nifty 50. In an interview with Moneycontrol, he added that on the other hand, there is a significant build-up near 22,000 Call open interest, which indicates that prominent investors are not expecting this level to be easily broken over the next few days. As a result, according to his opinion, unless prices close back above 22,000 for a downside target of 21,530 levels, the Nifty trend will remain negative.
Are the charts telling you that 21,500 can be the next target on the downside?
Nifty after touching lifetime high levels near 22,525 reversed back on the downside. During the rise from the lows of 21,137 to the high of 22,525, a lesser number of stocks were participating and we can see it in the advance-decline line that sharply deteriorated over the past few weeks. This indicates fewer stocks are participating during the rise and more declining stocks keep the overall breadth of the market negative.
This is a warning sign and we have also broken decisively below the 22,000 mark. This keeps the short-term tone negative. So we can expect prices to move lower towards the previous price action support area which is near 21,530 levels.
On the upside, there is a sharp build-up near 22,000 Call open interest indicating big players are not expecting this level to be broken easily over the next few days. In a nutshell, the Nifty trend remains negative unless prices close back above 22,000 for a downside target of 21,530 levels.
Will the Bank Nifty also break higher highs, higher lows formation considering the consistent downtrend?
We can see a classic divergence between the Nifty and Bank Nifty index. Nifty touched lifetime high levels on March 11, 2024, whereas Bank Nifty formed lower highs. Bank Nifty's lifetime high was made on December 28, 2023, at 48,636 and a lower high was made on March 6 at 48,161. Since then there has not been a single close on Bank Nifty above the prior daily candle high keeping the overall tone on the downside.
Over the short term, the indicators can be oversold but that will result in short-term pullbacks which can again be sold into. On the upside, 47,200 is going to be a major hurdle for Bank Nifty and immediate support is at 45,700.
In a nutshell, the pullback can be used to sell as long as 47,200 is intact for a move to 45,700 levels.
Do you think the Nifty Midcap and Smallcap indices are done with major correction and consolidate at current levels?
Currently, Nifty Midcap 100 is trading at the major price action area which is near 45,700 levels. A decisive break below 45,700 can accelerate further selling pressure and then we can expect correction towards 45,250 which also happens to be the next important support.
Recently, the Nifty Smallcap 100 gave a breakdown of a sloping trendline. After retesting the same prices reversed on the downside and now we can expect some correction towards 14,050 levels. While on the upside 15,000 is the key resistance level.
Do you think the Nifty IT will extend downward move and fill the gap of January 12?
Nifty IT has formed a Head and Shoulder pattern. Price has closed below 36,300 which confirms the breakout of the said pattern. As per this, possible targets will be 34,800-35,000, which is also a gap area of January 12. So we can expect the IT index to remain under pressure in the coming days. This is a short-term correction in IT index but the long-term trend remains positive.
Which are the two stocks to pick in the correction and why?
On the daily chart it has formed an Inverse Head and Shoulder pattern, which is bullish sign. A daily close above the neckline which is near Rs 815 level can confirm breakout of the said pattern, after which we can see the targets of Rs 860 on the upside. Whereas on the downside it has strong support near Rs 760 levels.
The stock touched 52-week high when broader market was moving down. This shows relative outperformance in the stock. Also, stock continued to gain from past 4 trading sessions with strong volume which shows buyers are in control. It has strong support at Rs 6,500 and break above Rs 7,200 will give fresh breakout for target of Rs 7,600 or higher.
Follow Ashish Kyal on Twitter - @kyalashish
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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