On the weekly charts, the index has formed an NR7 pattern. Historically, such patterns precede a surge in volatility and a decisive directional move, suggesting that a breakout or breakdown could be imminent in the coming sessions, said Sudeep Shah, the Deputy Vice President and Head of Technical and Derivative Research at SBI Securities in an interview to Moneycontrol.
He advised betting on two stocks for next week - InterGlobe Aviation, and Garware Hi-Tech Films which both are trading above their short and long term moving averages.
"Most noteworthy, in case of former, the daily RSI is in a bullish zone, while in case of later, the RSI is about to cross 60 mark," said Sudeep Shah with more than 18 years of experience in the capital markets.
Do you foresee the possibility of a rebound next week, considering the ongoing consolidation with support at 22,700 in Nifty after the recent sharp correction?
In line with our expectation, after the formation of the Record Session Count candlestick pattern, the benchmark index Nifty has taken a breather in the last week. The index has traded in a narrow range of nearly 330 points, which was the lowest weekly range since the last week of December. Throughout the week, the index formed small-bodied candles, signaling indecisiveness and a lack of strong conviction from both bulls and bears.
Despite consolidation in the frontline indices, the broader market indices, i.e., the Nifty Midcap and Nifty Small Cap 100, have relatively outperformed frontline indices. However, on Friday, both failed to sustain at higher levels and thereafter witnessed a correction.
Coming back to Nifty, on a weekly scale, the index has formed an NR7 pattern. The formation of this pattern indicates a phase of low volatility and range contraction. Historically, such patterns precede a surge in volatility and a decisive directional move, suggesting that a breakout or breakdown could be imminent in the coming sessions.
For Nifty, the zone of 22,600-22,550 will act as immediate support for the index. If the index slips below the level of 22,550, then we may witness a further correction upto the level of 22,250 level. On the upside, the zone of 23,050-23,100 will act as a crucial hurdle for the index. Any sustainable move above the level of 23,100 will lead to an extension of the pullback rally upto the level of 23,400, followed by the 23,700 level in the short term.
The Bank Nifty has still maintained a higher high-higher low formation and remains in consolidation. Will there be a consolidation breakout on the higher side in the new series?
The banking benchmark index Bank Nifty has been trading in a range of 49,628-48,525 zones since the last six trading sessions. Due to the consolidation, the moving averages started losing their curvy nature. The daily RSI (Relative Strength Index) has been in a sideways zone since the last couple of trading sessions as per RSI range shift rules.
Going ahead, the index is likely to continue its consolidation in the zone of 49,628-48,525 level for the next couple of trading sessions. A decisive breakout on either side will lead to a trending move in the index.
Do you expect a strong upward movement in JSW Energy?
JSW Energy has been witnessing a pullback rally since the last four trading sessions, along with the relatively higher volume. On Friday, it has surged above its 20-day EMA (Exponential Moving Average) level. The 20-day EMA has started edging higher. Further, the falling slope of 50 and 100-day EMA has been slowed down significantly, which is a bullish sign.
Going ahead, the stock is likely to continue its pullback rally and test the level of Rs 510, followed by 50-day EMA level, which is currently quoting at Rs 536.60 level.
Considering the Three White Soldiers pattern (not a classical one), are you bullish on NALCO and Hindalco Industries?
National Aluminum Company has formed a textbook Three White Soldiers pattern, indicating strong bullish momentum. With the stock surging past its 200-day EMA, we anticipate further upside in the coming trading sessions.
The stock of Hindalco Industries has not formed a textbook Three White Soldiers pattern, but it has given a downward sloping trendline breakout on a daily scale. Since the last three trading sessions, the stock has witnessed bullish momentum along with relatively high volume. Also, it has surged above its short and long-term moving averages. The daily RSI is in bullish territory, and it is in a rising mode. Hence, we believe the stock is likely to witness bullish momentum in the next couple of trading sessions.
What are your top two picks for next week?
InterGlobe Aviation (IndiGo)
Recently, the stock has taken support near its 200-day EMA level and thereafter witnessed a sharp upside rally. Currently, the stock is trading above its short and long-term moving averages. These averages have started edging higher, which is a bullish sign. Most noteworthy, the daily RSI is in a bullish zone. Hence, we recommend accumulating the stock in the zone of Rs 4,520-4,490 level with a stop-loss of Rs 4,360. On the upside, it is likely to test the level of Rs 4,730, followed by Rs 4,850 in the short term.
The stock has been strongly outperforming the frontline indices since the last couple of trading sessions. On Friday, it has given a consolidation breakout along with a relatively higher volume. Currently, it is trading above its short and long-term moving averages. The daily RSI is about to cross 60 mark. Hence, we recommend accumulating the stock in the zone of Rs 4,210-4,180 level with a stop-loss of Rs 4,360. On the upside, it is likely to test the level of Rs 4,470, followed by Rs 4,500 in the short term.
Has L&T bottomed out?
After hitting a low of Rs 3,183, the stock has seen a minor pullback rally, but with relatively low volume. It remains below both short and long-term moving averages, signaling weakness. Additionally, momentum indicators and oscillators suggest continued bearish pressure. Therefore, we believe the stock hasn't bottomed out yet.
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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