Midcap and smallcap indices rose over a percent each this past week, outperforming the headline index, and there are some stocks that investors can look at buying this week, Aditya Agarwala, Technical Analyst at YES Securities, said in an exclusive interview with Moneycontrol’s Kshitij Anand.
Q) The Nifty rose by close to 1 percent this past week, despite wild movements on either side. How do you see markets panning out in the coming week?
A) The Nifty rose 0.6 percent in the week ended April 20. However, price appreciation was on tepid volumes accompanied with a reduction in the daily price change as the week advanced, indicating lack of participation and maturing pullback rally.
Thin volumes, small real bodies and failure to sustain above 10,640 in the coming week can resume the corrections, dragging the index lower to levels of 10,380-10,300.
Q) There are plenty of stocks that are trading above their long-term average (200-DMA). Are these stocks value buys at current levels? What other filters should one add before initiating a trade?
A) Definitely, when a stock trades above the 200-DMA, that’s a healthy sign, a sign of strength. However, only 200-DMA does not provide the complete health score of a stock.
One should also look at the chart patterns along with Dow Theory, which says indices must confirm each other and volumes must confirm the trend.
Technical indicators like RSI, MACD also provide fruitful insight in identifying start and termination of trends. Therefore, one should look at a combination of few filters before initiating a trade, but the idea is to keep it simple and not look at multiple indicators at the same time.
Q) What is your call on smallcap and midcap stocks? Should investors stay away or just book profits on rallies?
A) Midcap and smallcap indices over 1 percent each this past week, outperforming the headline index. Both indices have recovered from their oversold territory. However, they are still trading below the 50 percent and 61.8 percent Fibonacci retracement levels.
In a typical counter-trend pullback, rally indices/stocks tend to reverse from these retracement levels (i.e. 50 percent and 61.8 percent). If both indices fail to trade beyond these retracement levels corrections can resume.
Therefore, investors should look to book profits in the midcap and small stocks on rallies to these retracement levels. However, there are few individual stocks within the midcap and smallcap space that can be bought, to name a few.
3) Biocon
6) DCB Bank
Q) What should be the ideal strategy of investors for expiry week?
A) As per options open interest data, Nifty is expected to remain range-bound within 10,500-10,600 levels in the coming week, which happens to be the April F&O series expiry week.
Investors can use this range to take long and short trades accordingly. Alternatively, they can opt for a short strangle strategy.
Q) Could you name 3 positional calls that could give handsome returns to investors in next 1 month?
A) 3 positional calls are as follows:
Avanti Feeds: BUY| Target Rs 2,900
The stock is on the verge of a breakout from a falling channel resistance placed at Rs 2,400. A sustained trade above this resistance with healthy volumes can resume the uptrend taking it to levels of Rs 2,700-2,900.
Further, RSI has turned upwards from its previous support zone of 43, currently trading above the 50 level suggesting higher levels in the coming trading sessions.
ITC: BUY| Target: Rs 320
The stock formed a sizable bull candle with healthy volumes indicating bullishness in the stock. Further, it has closed above the midpoint of the channel and its nine-weeks high of Rs 275.
On the monthly time frame, RSI has turned upwards from the neutral level of 50 suggesting higher levels in the coming trading sessions. A sustained trade above Rs 275 can extend the up move to levels of Rs 290-320 being the GAP area.
REC: BUY| Target Rs140
The stock is on the verge of a breakout from an Ascending Triangle consolidation suggesting a bear trend reversal on cards. A sustained trade above Rs 132 with healthy volumes will trigger a breakout from the pattern taking it to levels of Rs 136-140.
Further, RSI has formed a positive divergence indicating higher levels in the coming trading weeks.
Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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