According to Sudeep Shah of SBI Securities, the pullback rally in the Nifty 50 is likely to continue for the next couple of trading sessions. "As long as the index is trading above the 23,450 level, it is likely to continue its pullback rally upto the 100-day EMA level, which is currently placed at the 24,323 level," he said in an interview to Moneycontrol.
He believes the positive divergence is clearly visible on daily RSI, which indicates limited downside for now. Further, the RSI has given a positive crossover, which is a bullish sign, he said.
On the stocks front, DOMS Industries and Paytm appear bullish. "DOMS Industries has broken out of a symmetrical triangle pattern on the daily timeframe, signaling potential upward momentum. Meanwhile, Paytm is exhibiting a strong uptrend by consistently forming higher highs and higher lows on the daily chart," said Shah, the Head of Technical and Derivative Research at SBI Securities with more than 17 years of experience in the capital markets.
Nifty rebounded sharply from the oversold territory. Is the rally sustainable?
From its all-time high of 26,277, the benchmark index Nifty had tumbled over 11 percent in just 36 trading sessions, experiencing a swift and sharp correction. However, Thursday brought a glimmer of hope as the index found solid support near the 61.8 percent Fibonacci retracement level of its prior rally (21,281–26,277) and bounced back smartly.
In technical parlance, the 61.8 percent Fibonacci retracement level is known as the "golden ratio," which often acts as a pivotal turning point, sparking optimism for a potential trend reversal. Along with this pullback rally, the index has surged above its 200-day EMA (Exponential Moving Average) level. Also, the daily RSI (Relative Strength Index) has given a bullish crossover. Now, the million-dollar question is it just a retracement or a reversal?
We feel the pullback rally is likely to continue for the next couple of trading sessions. On the downside, the zone of 23,500-23,450 will act as immediate support for the index. As long as the index is trading above the 23,450 level, it is likely to continue its pullback rally upto the 100-day EMA level, which is currently placed at the 24,323 level. Above 24,350, the rally could further extend upto 24,550 levels.
On the downside, any sustainable move below the level of 23,450 will lead to resume its southward journey. In that case, it is likely to test the level of 23,150, followed by 22,800 in the short term.
Do you see any positive divergence in the market that could support this rally?
The positive divergence is clearly visible on daily RSI, which indicates limited downside for now. Further, the RSI has given a positive crossover, which is a bullish sign.
Q: Nifty Bank has been consolidating since October fall. Do you think it can break out successfully from the consolidation range around the 52,600 level?
The banking benchmark index, Bank Nifty, has been strongly outperforming the frontline indices over the past five trading sessions. Notably, on Thursday, the index found solid support near its 200-day EMA, triggering a sharp upside rally. By the week's end, it posted a gain of nearly 2 percent.
An intriguing observation is that during the recent correction, the index's daily RSI consistently held above the 40 mark. This resilience signals that Bank Nifty remains firmly in the bullish zone as per the RSI range shift rules.
Hence, we feel that Bank Nifty is likely to continue its outperformance in the short-term. Talking about levels, the zone of 51,400-51,500 will act as an immediate hurdle for the index. Any sustainable move above the level of 51,500 will lead to sharp upside rally upto the level of 51,900, followed by 52,400 in the short term. On the downside, the zone of 50,600-50,500 will act as immediate support for the index.
Do you foresee a robust run in Nifty IT, which has given a falling trendline breakout and is on the verge of a horizontal trendline breakout?
Nifty IT has given a downward sloping trendline breakout on a daily scale. The ratio chart of Nifty IT index as compared to Nifty is at 128-week high, which shows sustained outperformance. The momentum indicators and oscillators also suggest strong bullish momentum in the index.
Hence, we feel the index is likely to witness a sharp upside rally in the short term. Talking about level, the index is likely to test the level of 44,000, followed by 44,800 in the short term. On the downside, the zone of 42,600-42,500 will act as immediate support for the index.
Q: What are your top picks for the upcoming week?
The stock is strongly outperforming the frontline indices, and it is moving higher along with relatively higher volumes. Interestingly, the daily RSI has given a downward sloping trendline breakout, which indicates bullish momentum is picking up. Hence, we recommend accumulating the stock in the zone of Rs 1,900-1,880 level with a stop-loss of Rs 1,820. On the upside, it is likely to test the level of Rs 2,000, followed by Rs 2,050 in the short term.
The stock has given a downward sloping trendline breakout on a daily scale. This breakout is confirmed by robust volume. In addition, it has formed a sizeable bullish candle on a breakout day, which adds strength to the breakout. The daily RSI is surged above 60 mark, and it is in a rising mode, which is a bullish sign. Hence, we recommend accumulating the stock in the zone of 515-510 level with the stoploss of Rs 495. On the upside, it is likely to test the level of Rs 540, followed by Rs 560 in the short term.
Do DOMS Industries and Paytm look strong on the charts?
Both stocks appear bullish. DOMS Industries has broken out of a symmetrical triangle pattern on the daily timeframe, signaling potential upward momentum. Meanwhile, Paytm is exhibiting a strong uptrend by consistently forming higher highs and higher lows on the daily chart.
Do you still see an upward trend in the US Dollar index, which has seen a strong run-up since October?
Yes, from the last week of September, the US Dollar index is marking the sequence of higher tops and higher bottoms. Also, it is trading above its short and long-term moving averages. These averages are edging higher, which is a bullish sign. The daily RSI is in the bullish zone as per RSI range shift rules. Hence, we feel it is likely to continue its northward journey and test the level of 108.50, followed by 109 in the short term.
On the downside, the zone of 106.60-106.40 will act as immediate support for the DXY.
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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