According to Sudeep Shah of SBI Securities, technical indicators point to strong bearish momentum in the Nifty 50. The index is likely to test its prior swing low of 23,263 level (November low), followed by 23,000 levels in the short term, he said in an interview to Moneycontrol.
Currently, 90 percent of Nifty constituents are trading below their 20-day EMA (Exponential Moving Average), while 88 percent are trading below their 50-day EMA, reflecting significantly weakened internal market strength, he believes.
Even, the Bank Nifty is also likely to achieve 100% Fibonacci retracement level of its recent upward rally, he said.
After significant selling pressure in Siemens, he recommends exiting as well as staying away from Siemens for the next couple of months. "On a weekly scale, the stock has formed a Triple Top pattern, and it is about to slip below its neckline," said the Head of Technical and Derivative Research at SBI Securities with over 17 years of experience.
Are the charts signaling that the Nifty 50 can break the November low next week, though the volume is expected to be lower given the holiday season for FIIs? What do you advise in terms of strategy in such conditions?
After the Federal Reserve's monetary policy announcement on Wednesday, global indices witnessed a sharp decline. The sell-off was triggered by the Fed's decision to lower interest rates by a quarter point, as anticipated, but its projection of fewer rate cuts next year than previously estimated dampened investor sentiment. Our benchmark index, Nifty, has tumbled nearly 5 percent, marking its steepest weekly fall since June 2022. This decline has wiped out the gains of the past four weeks.
Adding to the bearish sentiment, Nifty has slipped below its short and long-term moving averages. Most notably, the daily RSI (Relative Strength Index) failed to cross the 60 mark and subsequently dropped below 40, signaling a bearish shift in momentum as per RSI range shift rules. Additionally, the MACD (Moving Average Convergence Divergence) line has crossed below the signal line, turning the histogram negative and reinforcing the bearish outlook.
Currently, 90 percent of Nifty constituents are trading below their 20-day EMA (Exponential Moving Average), while 88 percent are trading below their 50-day EMA, reflecting significantly weakened internal market strength.
These technical indicators collectively point to strong bearish momentum in the index. Talking about crucial levels, the index is likely to test its prior swing low of 23,263 level, followed by 23,000 levels in the short term, while resistance has shifted lower to the 23,950-24,000 zone for the short term.
Will the Bank Nifty achieve a 100% Fibonacci retracement (from November low to December high) next week?
Yes, it is likely to achieve the 100% Fibonacci retracement level of its recent upward rally. The banking benchmark index Bank Nifty has strongly underperformed frontline indices as it has tumbled by 5.27 percent. This was the steepest decline since February 2022. On a weekly scale, it has formed a sizeable bearish candle. Along with this fall, the index has slipped below its 20, 50, and 100-day EMA level. The daily RSI has also slipped below the 40 mark, and it is in a falling mode. These technical factors indicate further bearish momentum in the index.
Talking about levels, the 200-day EMA zone of 50,450-50,400 will act as immediate support for the index. Any sustainable move below the level of 50,400 will lead to a sharp correction up to the recent swing low of 49,787 level, followed by 49,000 in the short term, while, on the upside, the resistance has shifted lower in the zone of 51,300-51,400 level in the short term.
Do you expect General Insurance Corporation to extend its rally given the long horizontal resistance trendline breakout?
Yes, it is likely to extend its northward journey as it has given a symmetrical triangle pattern breakout on a weekly scale. This breakout is confirmed by above 50-week average volume. As the stock is trading at an all-time high level, all the moving averages and momentum-based indicators suggest strong bullish momentum.
However, the daily RSI, currently at 84.31, reflects an overbought condition, suggesting a potential short-term consolidation phase. Despite this, the overall trend remains positive, with the stock likely to continue its upward trajectory in the near term.
As per the measure rule of a symmetrical triangle pattern, the upside target is placed at the Rs 595 level. On the downside, the zone of Rs 470-465 is likely to act as immediate support for the stock.
After reading the chart structure, do you see Dr Reddy's Labs returning to record high by next week?
While the stock is expected to revisit its record high, this is unlikely to happen by next week. Instead, we anticipate it will achieve this milestone within the next 2–3 weeks.
Currently, the stock is trading within a Right-Angled Ascending Broadening Wedge pattern on the weekly chart. It recently rebounded sharply from the lower trendline of this pattern, supported by robust volumes. In the short term, the stock is likely to test the upper trendline of the wedge, which is presently around the Rs 1,500 level.
Moreover, the weekly RSI has remained in a bullish zone since May 2022, as indicated by RSI range shift rules, reinforcing the positive momentum in the stock.
Which are your 2 bullish bets for next week?
The stock has marked the high of Rs 1,313 on December 4, and thereafter, it has witnessed a throwback. Interestingly, during the period of throwback, the volume activity was mostly below average, which indicates a routine decline after a sharp rebound. The throwback was halted near the 20-day EMA level, and it coincides with the 38.2 percent Fibonacci retracement level of its prior upward rally. The stock has formed a strong base near the support zone and started rebounding along with the robust volume. The daily RSI is in a super bullish zone. Hence, we recommend accumulating the stock in the zone of Rs 1,240-1,230 level with a stop loss of Rs 1,195. On the upside, it is likely to test the level of Rs 1,300, followed by Rs 1,340 in the short term.
Recently, the stock has taken support near its 100-day EMA level and thereafter witnessed a sharp rebound along with robust volume. Further, it has surged above its short and long-term moving averages. Most noteworthy, the stock is strongly outperforming the frontline indices. Hence, we recommend accumulating the stock in the zone of Rs 1,580-1,590 level with a stop-loss of Rs 1,535. On the upside, it is likely to test the level of Rs 1,670, followed by Rs 1,730 in the short term.
Is it the time to stay away as well as exit Siemens?
Yes, we recommend staying as well as exit from Siemens for the next couple of months. On a weekly scale, the stock has formed a Triple Top pattern, and it is about to slip below its neckline. Also, it has strongly underperformed the frontline indices for the last couple of months, and it is trading below its short and long-term moving averages. The momentum indicators and oscillators are also suggesting strong bearish momentum in the stock.
What is your outlook for Nifty IT and Nifty Auto indices?
The Nifty IT index has recently slipped below its 20-day EMA, which is a bearish sign. The momentum indicators and oscillators also suggest declining momentum. The daily RSI has given a bearish crossover. In the Relative Rotation Graph (RRG), Nifty IT remains in the leading quadrant but has been declining over the past five sessions, indicating waning bullish momentum. Hence, we believe it is likely to witness consolidation with a bearish bias for the next couple of trading sessions.
Nifty Auto has given a stage-4 cup pattern breakdown on a daily scale. It is also trading below its short and long-term moving averages. These averages are in a falling mode. The daily RSI is in a bearish territory, and it is in a falling mode. Hence, we feel it is likely to continue its southward journey in the next couple of trading sessions.
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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