Chartist Talks: Sudeep Shah sees breakout in Bank Nifty, northward journey in Nifty 50; bets on these 2 stocks for next week

Sudeep Shah is the Deputy Vice President and Head of Technical and Derivative Research at SBI Securities

Sudeep Shah of SBI Securities, in an interview with Moneycontrol, said that the current chart structure suggests that the Nifty 50 is well-positioned to maintain its northward trajectory in the coming sessions.

Within this context, he believes Bank Nifty is a likely outperformer in the short term, as it edges closer to a breakout from its month-long consolidation. Strengthening this outlook, heavyweight banking names are also nearing breakout levels, which could collectively act as a catalyst for a strong upward move, said the Deputy Vice President and Head of Technical and Derivative Research at SBI Securities.

He is bullish on ICICI Prudential Life Insurance Company and Axis Bank for next week.

Are you confident Nifty 50 will surpass its recent swing high of 25,116 in the upcoming F&O expiry week?

"In a rising market, the 20-day EMA isn’t a floor—it’s a springboard." The recent price action perfectly illustrates that principle. After a sharp upside rally in the previous week, the benchmark index, Nifty, witnessed a much-needed breather as the index underwent a healthy correction. This pullback found support near the 20-day EMA, followed by a smart rebound, reaffirming its role as a key springboard in the ongoing uptrend.

Notably, this behaviour wasn’t isolated. A majority of frontline indices also bounced from their respective 20-day EMAs, highlighting that the broader market is still well-aligned with the primary bullish structure. As long as Nifty is trading above this dynamic support, the trend remains upward, and any dip should be viewed as a potential buying opportunity rather than a sign of weakness.

Extending this view, the current chart structure suggests that the index is well-positioned to maintain its northward trajectory in the coming sessions. Within this context, Bank Nifty stands out as a likely outperformer in the short term, as it edges closer to a breakout from its month-long consolidation. Strengthening this outlook, heavyweight banking names are also nearing breakout levels, which could collectively act as a catalyst for a strong upward move.

In terms of key levels, the zone of 24,950–25,000 will act as an immediate resistance for Nifty. A decisive close above 25,000 could unlock further upside towards 25,300 and eventually 25,500 in the short term. On the downside, the 20-day EMA zone of 24,550–24,500 remains a crucial support, and any weakness toward this zone is likely to attract buying interest.

In the coming week, do you anticipate a strong breakout from the month-long consolidation in the Bank Nifty?

Yes, we anticipate a potential breakout in the Bank Nifty from its ongoing month-long consolidation phase in the next couple of trading sessions. On Thursday, the index found support near its 20-day EMA and has since resumed its upward trajectory. The daily RSI is inching towards the 60 level and continues to gain momentum, indicating strengthening bullish sentiment.

Additionally, the ratio chart of Bank Nifty versus Nifty has bounced off its 50-day EMA, highlighting emerging relative strength in the banking index. This signals that Bank Nifty could start outperforming the broader market.

Within the index, heavyweight components such as HDFC Bank, ICICI Bank, and Axis Bank are also showing promising signs - they are all on the verge of breaking out of their respective consolidation patterns on the daily chart. This alignment across multiple key stocks adds to the conviction that a broader breakout in the index may be around the corner.

Talking about crucial levels, the zone of 55,700-55,800 is likely to act as a crucial hurdle for the index. Any sustainable move above the level of 55,800 will lead to a sharp upside rally up to the level of 56,500, followed by 57,200 in the short term. While on the downside, the 20-day EMA zone of 54,800-54,700 is likely to act as a crucial support for the index.

What are your top two stock picks for the last week of May?

ICICI Prudential Life Insurance Company

The stock has given a consolidation breakout on a daily scale. This breakout is confirmed by robust volume. In addition, it has formed a sizeable bullish candle on a breakout day. Currently, all the moving averages and momentum-based indicators suggest strong bullish momentum in the stock. Hence, we recommend accumulating the stock in the zone of Rs 645-640 level with a stop-loss of Rs 615. On the upside, it is likely to test the level of Rs 700 in the short term.

Axis Bank

The stock is on the verge of giving a downward sloping trendline breakout on a daily scale. The major trend of the stock is bullish as it is trading above its short and long-term moving averages. These averages are on a rising trajectory, and they are in the desired sequence, which suggests the trend is strong. The daily RSI has surged above the 60 mark and it is edging higher. Hence, we recommend accumulating the stock in the zone of Rs 1,210-1,200 levels with a stop-loss of Rs 1,160. On the upside, it is likely to test the level of Rs 1,310 in the short term.

Do you expect the higher high–higher low formation to continue in the Nifty Auto Index?

Yes, we believe the Nifty Auto index is well-positioned to continue its higher highs and higher lows formation on the daily timeframe. The index is currently trading above both its key short and long-term moving averages, which are gradually trending higher—an encouraging sign of sustained momentum.

What’s particularly notable is the behavior of the daily RSI. Since the last week of April, the RSI has repeatedly taken support near the 60 level and rebounded sharply thereafter, indicating strong underlying buying interest. On Thursday, the RSI once again found support near 59.61 and bounced back, which aligns with the RSI range shift principle, which is a bullish sign that suggests strength is returning.

This consistent pattern of support and rebound reinforces the bullish structure and suggests the uptrend in the Auto index is likely to persist.

Are you strongly bullish on Max Financial Services and HDFC Life Insurance?

At the current juncture, we see limited near-term upside for Max Financial Services. The stock's daily RSI is hovering above the 80 mark, which indicates an extremely overbought condition. Such elevated RSI levels typically signal the likelihood of a consolidation or pause in the uptrend before any potential continuation. Hence, a sideways phase cannot be ruled out in the short term before the next leg of the rally unfolds.

On the other hand, HDFC Life Insurance is displaying a robust uptrend. The stock is trading above all key moving averages, and momentum indicators continue to support the ongoing strength. Unlike Max Financial, HDFC Life still has room to climb higher, backed by a strong technical structure and sustained bullish momentum.

Do you see momentum picking up in the Nifty Consumption Index?

Yes, momentum in the Nifty India Consumption Index appears to be gradually picking up. The broader trend remains bullish, with the index trading above its key moving averages—an encouraging sign of sustained strength. Recently, the index made a high near the 11,720 mark before experiencing a minor pullback, which found support near the 20-day EMA—a typical healthy pause within an uptrend.

Going ahead, we believe the 11,650–11,700 zone will act as a crucial resistance area. A decisive and sustained move above 11,700 could trigger a sharp upswing, potentially taking the index toward the 12,200 level in the short term.

Is the FIIs’ positioning signaling a downtrend for the market?

FIIs turned net sellers, pulling out Rs 11,591 crore from the cash segment last week, including a massive Rs 10,000 crore sell-off on Tuesday - the highest in over two months. Another Rs 5,000 crore exit on Thursday added pressure. In index futures, net contracts rose to -54,197 from -23,498 on May 19, leading to the long-short ratio falling to 33 percent from 42 percent, signaling increased bearish bets. Key triggers include rising bond yields in the US and Japan, unconfirmed reports of Israel planning a strike on Iran, and a mild rise in COVID cases. Despite the sell-off, India’s broader market trend remains positive.

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.