"Technical factors indicate a bullish sentiment in Nifty. We believe the zone of 24,650-24,700 will act as an immediate hurdle for the index," Sudeep Shah, Head of Technical and Derivative Research at SBI Securities, said in an interview to Moneycontrol.
According to him, any sustainable move above 24,700 will lead to a sharp upside rally in the index upto 25,000 mark, followed by 25,200 in the short term.
He is bullish on Tech Mahindra and MCX India for next week. All the moving averages and momentum-based indicators are supporting the overall bullish chart structure in Tech Mahindra, while for MCX India, the range has shifted from bullish to super bullish zone as per RSI range shift rules, said Sudeep Shah who has over 17 years of experience.
Do you expect the momentum to continue and the Nifty to hit 25,000 mark next week?
On August 5, the benchmark index Nifty marked a low of 23,894 and thereafter started marking a sequence of gradual higher highs and higher lows. It has ended the week above the 24,500 mark with a gain of nearly 1 percent, and on a weekly scale, it has formed a bullish candle along with a lower shadow, which is a bullish sign.
Along with this upside, the index has reclaimed its 20-day EMA level and also retraced over 50 percent Fibonacci retracement level of its prior downward move (25,078-23,894). The daily RSI (Relative Strength Index) is quoting at the 55 level, and it is about to give a bullish crossover. While the daily stochastic has already given a bullish crossover.
These technical factors indicate a bullish sentiment in Nifty. However, we believe the zone of 24,650-24,700 will act as an immediate hurdle for the index as the 61.8 percent Fibonacci retracement level of its prior downward move is placed in that region. Any sustainable move above the level of 24,700 will lead to a sharp upside rally in the index upto the level of 25,000, followed by 25,200 in the short term.
On the downside, the zone of 24,250-24,200 will act as immediate support for the index.
Will the Bank Nifty get into momentum next week?
Since the last 9 trading sessions, the Bank Nifty has been oscillating in the zone of 50,830-49,655 level. During this period, two times, the index has taken support near 100-day EMA level and thereafter witnessed a sharp rebound, which is a bullish sign. Further, on a weekly scale, the index has formed small body candles with long lower shadows for the second consecutive week. This clearly indicates the buying interest at 100-day EMA level.
Despite consolidation, the momentum indicators and oscillators portray different picture. The leading indicator, 14-period daily RSI, is showing the positive divergence. A positive divergence occurs when the price is making a lower low, while the RSI forms a higher low. But indicators can show divergence for a longer period, it must need to confirm by price. Further, the daily Stochastic has given bullish crossover.
Hence, we believe that Bank Nifty is likely to start the momentum in the next couple of trading sessions. Talking about levels, the zone of 50,800-50,900 will be the immediate hurdle for the index as 20 and 50-day EMA is placed in that region. Any sustainable move above the level of 50,900 will lead to sharp upside rally upto the level of 51,700, followed by 52,300 in the short term. On the downside, the zone of 49,900-49,800 will act as immediate support for the index.
What is your trading strategy for the Nifty and Bank Nifty for next week, especially after a strong trend?
We feel Nifty is stronger of the 2 indices & the current momentum can continue upto 24,700-24,750 in the coming few sessions. Hence, we advise going with a Nifty Bull Call Spread strategy. Traders can buy 24,550 strike Call at Rs 144 & Sell 24,700 strike Call at Rs 72. The net outflow (maximum loss) in the strategy could be 72 points in case Nifty closes below 24,550 on the expiry day. The maximum profitability in this strategy could be 128 points once Nifty closes above 24,700 on the weekly expiry day.
Will the Nifty IT sustain ongoing momentum?
Nifty IT has been significantly outperforming the frontline indices over the last few trading sessions. The ratio chart of Nifty IT compared to Nifty is at a 20-week high and has recently shown a consolidation breakout, signaling that the IT sector is poised for short-term outperformance
Further, the index is trading above its short and long-term moving averages. These averages are in rising trajectory, and they are in the desired sequence, which suggest trend is strong. The daily RSI is in bullish territory. Hence, we believe it is likely to continue its northward journey and test the level of 41,500, followed by 42,200 in the short term.
Which are the 2 stocks to bet on after reading the charts?
The stock has given stage-2 Cup pattern breakout on a daily scale. This breakout is confirmed by robust volume. As the stock is trading at all-time high, all the moving averages and momentum-based indicators are supporting the overall bullish chart structure. Hence, we recommend accumulating the stock in the zone of Rs 1,590-1,580 level with the stop-loss of Rs 1,530. On the upside, it is likely to test Rs 1,670, followed by Rs 1,720 in the short term.
The stock has given consolidation breakout on a daily scale, along with robust volume. The daily RSI has taken support near 60 levels and witnessed rebound. This indicates that the range has shifted from bullish to super bullish zone as per RSI range shift rules. Going ahead, the stock is likely to test the level of Rs 4,870, followed by Rs 4,950 level in the short term. Maintain the stop-loss of Rs 4,490 level.
What is your take on the PB Fintech?
The stock has given a 6-week consolidation breakout on a daily scale. This breakout is confirmed by robust volume, which shows strong buying interest from market participants. In addition, it has formed sizeable bullish candle on a weekly and daily scale, which adds strength to the breakout.
As the stock is trading at all-time high, all the moving averages and momentum-based indicators are suggesting strong bullish momentum in the stock. The daily and weekly RSI is in a super bullish zone. The daily and weekly MACD (Moving Average Convergence Divergence) stays bullish as it is quoting above its zero line and signal line. The MACD histogram is suggesting pickup in upside momentum.
These technical factors are aligned in favour of bulls. Hence, we believe the stock is likely to continue its upward journey and test the level of Rs 1,850, followed by Rs 2,000 in the short term. On the downside, the zone of Rs 1,590-1,570 is likely to provide the cushion in case of any immediate decline.
Is it the time to bet on Birlasoft?
Technically, the stock is in strong downtrend as it is trading below its short and long-term moving averages. Hence, we recommend avoiding this stock for now.
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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