Chartist Talks: Sudeep Shah of SBI Securities sees strong bullish momentum in these 2 stocks

This week has turned out to be a wonderful one as the benchmark index  has surged above the 23,000 mark and registered a fresh all-time high. Along with this rise, it has broken out of a horizontal trendline, which was formed by connecting recent swing highs. As the index is trading at an all-time high, all the moving averages and momentum-based setups indicate strong bullish momentum. The daily RSI (Relative Strength Index) has surged above the 60 mark for the first time after 26 trading sessions, and its trajectory is rising.

Examining the market breadth, the 20-day SMA (simple moving average), a key indicator used by traders to assess short-term trends, shows significant improvement. Currently, 43 of the Nifty 50 stocks are trading above their 20-day SMA, a substantial increase from just 14 stocks nearly two weeks ago. Additionally, there's been an uptick in stocks reaching new 10-day highs, another important metric for short-term trend analysis.

These developments clearly signal a strengthening of the market sentiment in recent trading sessions, suggesting continued optimism in the near term, especially looking at the renewed momentum in largecaps.

We believe the zone of 22,750-22,700 will act as important support for the index in the short term as per the rule of change in polarity, i.e., the previous resistance, once breached, acts as a support level. As long as the index is trading above this support zone, it is likely to test the level of 23,150, followed by 23,350 in the short term.

Given the rising trendline, do you see the Bank Nifty moving towards the 50,000 mark?

On Thursday, the Bank Nifty saw a base breakout on the daily scale and resumed its northward journey. It has ended the week near the 49,000 mark, with a gain of 1.6 percent. On the weekly scale, it has formed a sizeable bullish candle, hitting higher highs and lows compared to the prior week, which is a bullish sign. Along with this rise, it has surged above its 20 and 50-day EMA (exponential moving average) level, which is also a bullish sign. Among the momentum indicators, the daily RSI has surged above the 60 mark for the first time after 14 trading sessions, and its trajectory is rising.

Among the constituents of the Bank Nifty, 75 percent of the  stocks were trading above their 20-day SMA, the highest since May 03, 2024. This  indicates that the banking space has improved significantly in the current week.

These technical factors clearly indicate strong momentum in the index. Talking about levels, the 20-day EMA zone of 48,200-48,250 is likely to act as strong support for the index. As long as the index is trading above the 48,200 level, it is likely to continue its northward journey and test 49,800, followed by 50,200 in the short term.

Do you expect the bullish bias in Bharat Forge to continue?

Bharat Forge has recently seen a horizontal trendline breakout at the Rs 1,330 level on May 8, 2024. Thereafter, it has witnessed a sharp upside rally along with robust volumes. Since the last couple of trading sessions, the stock has strongly outperformed Nifty Auto index. As it is trading at an all-time high, all the moving averages and momentum indicators are suggesting strong bullish momentum in the stock.

Going ahead, it is likely to continue its northward journey and test the level of Rs 1,650, followed by Rs 1,700 in the short term. On the downside, the zone of Rs 1,510-1,500 is likely to provide a cushion in case of any immediate decline.

Is the Nifty Auto looking overbought at current levels?

Technically, Nifty Auto is in a strong uptrend as it is marking  higher tops and higher bottoms on the daily scale since March 2023. The ratio chart of the Nifty Auto index compared to Nifty is at a 72-month high, which indicates strong outperformance  compared to frontline indices.

While the index is in an overbought zone, the price chart portrays a bullish picture. Also, as witnessed in the past, overbought situations can persist for longer, and prices can continue trending higher.

Traders can consider keeping trailing stop-loss, with crucial support placed at 23,300-23,200 levels.

Are the charts telling you that Nifty Pharma is likely climbing the 20,000 mark in the coming weeks?

Nifty Pharma has been oscillating in the range of 18,300-19,400 since the last 65-trading sessions. Due to the consolidation, the short-term moving averages have started losing their curvy nature. Further, the daily RSI has been in the sideways zone since March 2024.

Hence, we believe it is likely to continue its sideways consolidation in the short term. Any sustainable move above 19,400 will lead to a sharp upside rally in the index, up to 20,000-20,300.

Is the PFC chart looking quite strong?

Yes, PFC has given a breakout of the Bullish Flag pattern on the daily scale, confirmed by robust volumes. Additionally, it formed a sizeable bullish candle on breakout day, adding strength to the breakout. The momentum indicators and oscillators also support the overall bullish chart structure.

Going ahead, per the measure rule of the Bullish Flag pattern, the upside target is placed at Rs 540. On the downside, Rs 475-470 is likely to provide a cushion in case of any immediate decline.

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