"We believe 17,470-17,420 would act as a strong support zone in the near term and if the mentioned support zone is protected we anticipate a pullback towards 17,800-18,200 on the Nifty50," Rohan Shah of Stoxbox says in an interview with Moneycontrol.
After the recent bloodbath in the markets, the Head of Technical Research with over eight years of experience feels there are a couple of stocks that denote a solid chart structure and look lucrative on the higher degree charts, which are expected to do well in the future.
"We are optimistic on Ashok Leyland, Max Healthcare, Supreme Industries, IRCON, and Apollo Tyres," Shah says. Excerpts from the interview:
Do you expect the Nifty to break 200 DEMA (day exponential moving average) as well as 200 DMA (day moving average) in the coming days or will there be a sharp pullback, especially after the recent turmoil?
Post sharp selloff last week and the breakdown below the key support level of 17,800 all eyes are now glued on 200 DEMA (of 17,550) which is designated to be the last ray of hope for the bulls. In September 2022, the index had corrected 7.5 percent from a swing high and formed a bottom near the 200 DEMA (16,750).
A similar price action has been observed now; so far the index has plummeted 7.4 percent from the recent swing high (18,888) and currently, it is placed around 200 DEMA. Also, near the same juncture, the index has a support of 38.2 percent retracement level of its prior whole advance from 15,183 to 18,888 and 50 WEMA (weighted exponential moving average), which is placed around 17,470 and 17,420, respectively.
Thus we believe this zone to act strong support zone in the near term and if the mentioned support zone is protected we anticipate a pullback towards 17,800-18,200.
As we have seen a bloodbath on Dalal Street, which are the potential multi-baggers to buy now?
Technically, there are a couple of stocks that denote a solid chart structure and look lucrative on the higher degree charts. They are expected to do well in the future and one should follow a buy-on-dips approach with a time horizon of 8-12 months.
To name a few, we are optimistic on the following stocks: Ashok Leyland, Max Healthcare, Supreme Industries, IRCON, and Apollo Tyres.
Do you think the Bank Nifty will hold the 40,000 mark or will it get broken decisively?
Analysing the short-term and medium-term charts, we perceive the Bank Nifty has significant support a few points below 40,000, i.e. at the 39,700-38,800 zone.
Around this territory, the banking index has a confluence of support which includes reciprocal AB=CD Harmonic Pattern, 200 DEMA, and a cluster of Fiboannic retracement lines. Hence if the mentioned support zone is validated, we sense an oversold bounce cannot be ruled out.
India VIX moved closer to 200 DMA now. Do you expect the VIX to cross the high of September 2022?
There seems to be a low probability of the VIX index surpassing the high of September 2022. From the level perspective, the VIX index has a key resistance around the 20-20.50 zone; till that is not taken out, the VIX index is expected to trade in a broad range from 12-20.
What should be the best strategy to follow in such kind of environment?
Staying with the leaders would be the best strategy to follow. To pick the stocks from the universe which have relatively outperformed the benchmark index, stocks that have managed to hold 20 DEMA, solid chart structure and stock prices continue to form progressive higher highs and lows. Apart from technical parameters, traders must follow their trading plan, disciplined in following stop loss and targets.
As per your technical studies, which is the best trading (technical) pattern that works in such a fall as well as in an uptrend?
Being an ardent follower of Harmonic Patterns, I use different Harmonic Patterns, primarily to project potential reversal zones, trend reversal, and trend continuation. Harmonic Pattern is an advanced concept in technical analysis that was introduced in 1999 by Scott Carney. These patterns are derived by applying different Fibonacci tools, ratios, and techniques.
They unveil unique trading opportunities with a favourable risk-to-reward setup. Like price patterns, there are different Harmonic Patterns such as AB=CD, Gartley, BAT, Crab, Butterfly, Cypher, etc. Among other patterns, I extensively follow AB=CD Harmonic Pattern, which is easy to spot and accurate in spotting reversals and momentum.
Will the Nifty Auto index hit a record high in February?
The index witnessed renewed buying interest over the past few weeks after the index reversed retesting the neckline of the multi-month Cup and Handle price pattern. The momentum indicator continued to stay strong.
Despite a sharp selloff in the broader market, the Auto index managed to close the last week higher by 3 percent, which clearly denotes the inherent strength. Thus, there is a high probability that the Nifty Auto index is likely to hit a record high in February.
What does the February series look like?
There are two major events lined up this week, India's Union Budget and US Fed's first policy meeting in 2023, which will set the tone for the markets in the near term. However, we would be closely following the levels discussed earlier and will approach the market accordingly.
If the mentioned support zone in Nifty & Bank Nifty is protected there is scope for the pullback. Among the sectors, NiftyPharma, NiftyAuto, NiftyFMCG, and NiftyIT are expected to do well in the February series.
Any three stock picks for short term?
Berger Paints: Sell | LTP: Rs 540 | Stop-Loss: Rs 565 | Target: Rs 470 | Return: 13 percent
The price action on Berger Paint continues to deteriorate whilst trading in stage 4 of corrective phase and is already trading below the 200 WEMA and 61.8 percent. The price action further plummeted below the crucial polarity trendline and a pivotal support in the week gone by.
The relative strength and performance as compared to Nifty is trading with a negative slope over the last 7 months which is not a good sign. The RSI too is trading with a lower high and lower low sequence since it peaked in January 2021 which indicates dearth in strength of the price momentum.
InterGlobe Aviation: Buy | LTP: Rs 2,094 | Stop-Loss: Rs 2,000 | Target: Rs 2,265 | Return: 8 percent
The price action on the daily timeframe has staged in a Cup and Handle schematic. It is currently hovering a pivotal support Rs 2,070.
The major moving averages have a positive slope which indicates bullish biasness, it is relatively outperforming the benchmark index of Nifty which dictates strength in the stock. The RSI is consolidating near the media and the MACD is trading in the positive territory.
The price action has immediate support at 20 DEMA trading at 2074 levels and it is anticipated to attract further bullish momentum on sustenance above the same.
Sun Pharma: Buy | LTP: Rs 1,043 | Stop-Loss: Rs 1,005 | Target: Rs 1,125 | Return: 8 percent
The price action on the daily time frame is trending in the direction of its prior bullish pattern breakout of rounding bottom. It saw decent profit taking from 52-week high level and the intermediate corrective trend resulted in the formation of bullish reversal harmonic pattern of ABCD. It is now bolstered by a pivotal support.
The pharma stock displays stronger relative performance as compared to the head index of Nifty the trending momentum shows strength by means of RSI scaling above 60 levels. Hence we reiterate a bullish bias in the pharma stock.
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