Sudeep Shah of SBI Securities believes Nifty Pharma index is likely to continue its upward journey and test the 23,000 mark in the short-term.
The daily and weekly RSI and MACD stay bullish, while the MACD histogram also suggests an acceleration in momentum, reinforcing the positive outlook for the Nifty Pharma, he said.
Shah is bullish on Coromandel International, and Alkem Laboratories. "Coromandel is on the verge of giving horizontal trendline breakout on a daily scale, while Alkem has given horizontal trendline breakout on a weekly scale and the said breakout is confirmed by robust volume," said the Head of Technical and Derivative Research at SBI Securities with more than 17 years of experience.
Do you see the Nifty 50 climbing above 24,700 in the coming week considering the Hammer pattern formation on the weekly charts?
The past week was marked by significant volatility due to several key events, including issues with the yen carry trade, geopolitical tensions in the Middle East, recession fears, and the Reserve Bank of India's monetary policy decisions. These events resulted in almost all the sessions witnessing either a gap-up or a gap-down opening.
Compared to global peers, the Nifty is demonstrating strong outperformance. From their all-time highs, the Nasdaq is down over 11 percent, the S&P 500 is down 6 percent, Dow is down nearly 5 percent, and Japan's Nikkei has declined over 16 percent. In contrast, despite global uncertainties, the Nifty fell only by 2.83 percent from its all-time high.
Technically, the Nifty oscillated between 20 and 50-day EMA (Exponential Moving Average) levels of 23,900 & 24,400 during the week ended August 9. However, in the second half of the week, it witnessed recovery after taking support near the 50-day EMA level, which helped the index to recoup some losses. It ended the week at the 24,367 level with a loss of 1.42 percent. On a weekly scale, it has formed a small body bullish candle with a long lower shadow. The long lower shadow indicates buying interest at lower levels.
Most noteworthy in the recent decline, the RSI (Relative Strength Index) found support near the 40 mark and experienced a sharp rebound, which is a bullish signal according to RSI range shift rules. However, this needs to be confirmed by price action, which will occur only if the index sustains above the 24,650-24,700 level -- a gap zone formed on August 5. Any sustainable move above 24,700 could lead to a sharp upside rally up to the level of 25,000, followed by the 25,200 level.
On the downside, the 50-day EMA zone of 24,050-24,000 will serve as crucial support. Any sustainable move below 24,000 will lead to resume its downward trend and may test the 23,700 level in the short term. Overall, we expect Nifty to consolidate between 24,000 and 24,700.
Do you see the chances of strong rebound in the Bank Nifty in the coming week considering the consolidation after recent downtrend?
For the last five trading sessions, the Bank Nifty has been oscillating between 100 and 200-day EMA level. It has also witnessed high volatility as almost each trading session of the week it has either witnessed gap-up or gap-down opening. The daily RSI is still in bearish territory, while the daily Stochastic has witnessed minor rebound after touching oversold region.
Among the constituents of Bank Nifty, the short-term trend of Axis Bank, ICICI Bank, and IndusInd Bank is bearish, while, HDFC Bank, which is holding highest weightage in the index, is in sideways to bullish trend. This divergence is helping the Bank Nifty to sustain at current level despite selling pressure in frontline banks.
Going ahead, the 100-day EMA zone of 49,700-49,600 will act as immediate support for the index. Any sustainable move below the level of 49,600 will make it resume its southward journey. In that case, the next support is placed in the zone of 49,100-49,000 levels. On the upside, the 50-day EMA zone of 50,700-50,800 will act as an immediate hurdle for the index. Any sustainable move above the level of 50,800 will lead to a sharp short-covering rally in the index.
Two stocks that are poised for strong breakout?
The stock is on the verge of giving a horizontal trendline breakout on a daily scale. In the last three trading sessions, the volumes recorded were above the 20-day average, which is a sign of accumulation before actual breakout happens. The daily RSI is above the 60 mark. Hence, we recommend accumulating the stock in the zone of Rs 1,695-1,685 levels with the stop-loss of Rs 1,640 level. On the upside, it is likely to test the level of Rs 1,775, followed by Rs 1,820 in the short-term.
The stock has given horizontal trendline breakout on a weekly scale. This breakout is confirmed by robust volume. The daily MACD (Moving Average Convergence Divergence) histogram suggests a pickup in upside momentum. Hence, we recommend accumulating the stock in the zone of Rs 5,800-5,750 level with the stop-loss of Rs 5,600. On the upside, it is likely to test the level of Rs 5,970, followed by Rs 6,100 level in the short-term.
Do you think the Nifty Pharma is in a strong uptrend and is ready for a move towards 23,000 mark?
Yes, in recent weeks, the Nifty Pharma index has been a standout performer compared to frontline indices. The ratio chart of Nifty Pharma versus Nifty has reached a 38-month high, highlighting its strong outperformance. Additionally, on a weekly scale, the Mansfield Relative Strength indicator has remained above the zero line for 56 consecutive weeks, underscoring the sustained strength of the pharmaceutical sector.
The daily and weekly RSI is in super bullish zone. The daily and weekly MACD stays bullish, as they are positioned above their respective zero and signal lines. The MACD histogram also suggests an acceleration in momentum, reinforcing positive outlook for the index.
Hence, we believe, it is likely to continue its upward journey and test the level of 23,000 mark in the short-term. On the downside, the 13-day EMA zone of 20,500-20,600 is likely to provide cushion in case of any immediate decline.
Do you see consolidation breakout in the Nifty Auto soon?
The index has formed strong base near the support zone of 24,450-24,500 level and resumed its upward journey.
Currently, the index is still trading below its 20-day EMA level of 25,425. Any sustainable move above the level of 25,425 will lead to extension of pullback rally up to the 26,200 level in the short-term. On the downside, the zone of 24,750-24,700 will act as immediate support for the index.
Within the Auto space, Eicher Motors and TVS Motor are displaying outperformance and can show superior momentum over the course of the next few weeks.
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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