The Nifty has failed multiple times from the 22,800 level. So, "it is not going to be easy for bulls to take prices back above 22,800 immediately," Ashish Kyal, the CMT, founder and CEO of Waves Strategy Advisors, told Moneycontrol in an interview.
Further, he feels that if the Nifty falls below 22,350, it will be a bearish sign. "Bulls need to sustain above 22,650 followed by 22,800 for the up move to resume," said Kyal.
PFC and REC look overbought now, but there is no sign of a trend reversal in Zomato yet, said Kyal, who has spent more than two decades in the capital market.
Edited excerpts from the interaction follow.
What are your top two bets for the May series that can definitely give double-digit returns?
Prestige has closed above Rs 1,400 levels, which confirms the breakout of the rounding bottom pattern. Even when the broader market corrected sharply last week, this stock managed to touch its 52-week high, which indicates a relative outperformance. Use dips towards Rs 1,430 as a buying opportunity for a move towards Rs 1,580 levels as long as Rs 1,350 holds on the downside.
Currently, prices are moving in a higher high, higher low pattern. The ADX (average directional index) indicator is trading at 28.38, indicating a trending move. Prices are moving towards a previous swing high near the Rs 1,490 level. A break above Rs 1,490 can result in fresh buying, which can lift the price towards Rs 1,600-1,620 as long as Rs 1,380 holds on the downside.
Do you still expect PFC and REC to rise after the recent sharp run?
PFC continued to follow the bar technique as it is continuously giving a close above the previous day’s high, which keeps the overall tone on the positive side. Also, the stock has closed above the previous swing high, which was near Rs 477. On the short-term indicator it is overbought, so we can expect dips but that can be used as a buying opportunity. It is best to use any move to Rs 460-450 to enter this stock for a move to the Rs 520 level as long as Rs 430 remains protected.
In the previous session, REC formed a Doji candle, which shows indecision among buyers and sellers. As the daily RSI (relative strength index) is in the overbought zone, the possibility of profit booking cannot be ruled out. One can use the buy on dips approach to ride the trend, with the target at Rs 575. The nearest support is at the Rs 510 level.
Do you expect the Nifty to break the rising channel on the higher side next week, by hook or crook?
The Nifty has failed multiple times from the 22,800 level. We can see that it got rejected thrice from there, with a sharp reversal after touching lifetime highs even on Friday. This simple price action is not a good sign. Also, on the momentum indicator RSI, we can see a bearish divergence, which indicates that the up move was with slower momentum.
So, it is not going to be easy for the bulls to take prices back above 22800 immediately. We have to wait and see if prices can first sustain above the 22,650 level. On the downside 22,350 is the immediate support. It is best to wait for the 22,650–22,350 range to be broken to trade in that direction over the short term. Any breach back below 22,350 will be a bearish sign. The bulls need to sustain above 22,650 followed by 22,800 for the up move to resume.
Are you cautious on the market due to the consistent upward move in the volatility index?
India VIX touched the low below 10 on April 23 and from there it has steadily increased. A rise in the VIX is usually an indication of uncertainty and suggests a cautious approach by traders. So, a consistent upmove in the VIX is a cause for concern. In the coming week if the index breaches below 22,350 then we may see a further rise in this indicator.
What is your technical and F&O trading strategy for the Nifty and Bank Nifty for the next weekly expiry?
For the coming week, one can use the pullback on the Nifty to sell weekly Call options for a strike of 23,050 as it will not be easy for the index to break above 23,000 unless strong momentum is witnessed across the sector.
For the Bank Nifty, if spot prices break below 48,650, then weekly 49,000 Put options can be bought over the short term.
Do you see a further northward opportunity in Zomato, despite it looking like a Double Top kind of pattern?
Zomato is trading at all-time high levels. If the stock makes a decisive break above the Rs 200 level then we can expect further bullish momentum to continue with the target at Rs 215. There is no sign of a reversal yet. Only a breach below Rs 188 will indicate a double top formation on the stock.
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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