Chartist Talks: June breakout on the cards? Sudeep Shah bets on these 2 stocks for next week

During the May series, Nifty futures remained confined within a narrow range of just 1,165 points, which was the tightest in recent memory, reflecting a phase of subdued volatility and indecisiveness among market participants. For the majority of the series, the index hovered in a consolidation zone, with neither the bulls nor the bears asserting strong control. Despite the lack of a decisive trend, the index showed resilience and managed to close the series in green, indicating underlying strength.

This muted price action suggests that the market is possibly gearing up for a directional breakout in the upcoming series. Supporting this view, the rollover of Nifty Futures rose to 79.10 percent in the May series, slightly higher than April’s 79.08 percent and above the three-month average of 78.09 percent. This marginal increase in rollover activity, especially amid a narrow-range series, reflects traders’ willingness to carry forward their positions, possibly in anticipation of a breakout move. It indicates sustained interest and confidence in the market’s underlying structure, hinting at a potentially more active and volatile June series.

In terms of key levels, the zone of 25,050–25,100 will act as an immediate resistance for Nifty. A sustained move above 25,100 could open the gates for a sharp rally towards 25,500, followed by 25,700 in the short term. On the flip side, the zone of 24,550–24,500 remains a crucial support. If the index slips below the level of 24,500, then the 50-day EMA will act as the next important support, which is currently placed in the zone of 24,150-24,100 levels.

What is your view on the seasonality for the month of June?

Tracking seasonality, over the past 18 years, the June month has often exhibited a positive trend for Nifty. On 11 occasions, the index has concluded on a positive note with an average gain of 4.19 percent, while on 7 occasions, it has ended on a negative note with an average loss of 3.80 percent. The average return for Nifty in the June series has been 1.09 percent. Over the past 18 years, June has consistently shown an average volatility of 7.80 percent for the Nifty index.

Historically, Bank Nifty has also shown a positive trend in June over the past 18 years. Out of these, it closed positively 11 times, with an average gain of 4.52 percent, while ending negatively 7 times, with an average loss of 5.63 percent. The average return for Bank Nifty in the June series has been 0.58 percent. However, Bank Nifty has demonstrated an average volatility of approximately 9.30 percent for the past 18 years.

Do you expect a significant consolidation breakout in the Bank Nifty next week?

Over the past 26 trading sessions, the Bank Nifty index has been moving in a sideways trajectory, gradually shaping a Stage-2 Cup pattern on the daily chart, which is a classical continuation formation that typically precedes an upward breakout. This constructive consolidation suggests healthy digestion of prior gains rather than a loss of strength.

Despite the rangebound price action, the broader trend remains firmly bullish, supported by the index’s ability to sustain above its key short and long-term moving averages. The daily RSI is oscillating in a narrow range of 62-56 zone since the last couple of trading sessions.

This kind of price and indicator behaviour typically reflects a market in preparation mode, where strength is being quietly built beneath the surface. A breakout above the resistance zone could act as a catalyst, attracting fresh buying interest and driving the index toward higher levels.

Talking about crucial levels, the zone of 56,000-56,100 will lead to a sharp upside rally upto the level of 56,900, followed by 57,600 level in the short term.

While on the downside, the 20-day EMA zone of 55,050-54,950 will act as immediate support for the index. If the index slips below the level of 54,950, then the next crucial support is placed at 54,400 levels.

What are your top two stock picks for next week?

Punjab National Bank (PNB)

The Nifty PSU Bank has given a horizontal trendline breakout on a daily scale. The stock of PNB has also given a trendline breakout along with robust volume. In addition, it has formed a sizeable bullish candle on a breakout day, which adds strength to the breakout. The momentum indicators and oscillators are also suggesting strong bullish momentum in the stock. Hence, we recommend accumulating the stock in the zone of Rs 106-105 levels with a stop-loss of Rs 102 level. On the upside, it is likely to test the level of Rs 113 followed by Rs 116 in the short term.

ITC Hotels

The major trend of this stock is bullish as it is marking the sequence of higher tops and higher bottoms. Recently, the stock took support near its 20-day EMA level and thereafter witnessed a smart rebound. The reversal from the support zone is confirmed by relatively higher volume. The daily RSI is in bullish territory, and it is in rising mode. Hence, we recommend accumulating the stock in the zone of Rs 217-215 level with a stop-loss of Rs 209 level. On the upside, it is likely to test the level of Rs 232 followed by 238 in the short term.

Is the chart indicating a strong breakout in Eternal?

Recently, the stock of Eternal has taken support near its prior swing low zone and thereafter witnessed a smart rebound along with robust volume. Further, it has surged above its crucial moving averages. Considering the current chart structure, if the stock sustains above the level of 247, then we may witness a sharp upside rally in the stock.

Are you highly bullish on BSE?

Yes, the stock has given a consolidation breakout on a daily scale along with robust volume. In addition, it has formed a sizeable bullish candle. Most noteworthy, the daily RSI took support near 60 mark and thereafter witnessed a sharp rebound, which is a bullish sign as per RSI range shift rules. Hence, considering this chart structure, we are bullish on BSE.

Are the charts signalling a strong rally in the Nifty Midcap and Smallcap indices in the coming weeks?

In the month of May, the Nifty Midcap and Nifty Smallcap 100 indices have significantly outperformed the frontline benchmarks, posting robust gains of 6.09 percent and 8.72 percent, respectively. Notably, both indices have closed in the green for three consecutive trading sessions, underscoring sustained buying interest.

The ratio charts of both indices relative to the Nifty are forming a series of higher highs and higher lows, highlighting consistent outperformance. Additionally, key moving averages and momentum indicators continue to reflect strong bullish undertones. Given these technical signals, we believe the outperformance of Midcap and Smallcap indices is likely to persist in the near term.

Going ahead, the Nifty Midcap 100 is likely to continue its upward journey and test the level of 58,400, followed by 59,000 in the short term. While on the downside, the zone of 56,800-56,700 is likely to act as immediate support for the index.

For the Nifty Small Cap 100, the zone of 18,000-18,050 will act as an immediate hurdle for the index. Any sustainable move above the level of 18,050 will lead to a sharp upside rally upto the level of 18,300, followed by 18,600 in the short term. While, on the downside, the zone of 17,700-17,650 will act as a crucial support for the index.

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.