There is a high possibility that Nifty IT might consolidate between 31,000 and 32,000 in the coming weeks, says Jigar S Patel, Senior Manager - Equity Research at Anand Rathi, in an interview with Moneycontrol.
On the stocks front, he says on the weekly chart, a range breakout is seen in City Union Bank with massive volume, which is looking lucrative. Thus, he advises traders to go long in the stock in the range of Rs 134-138.
Patel, with over 9 years of experience in technical analysis, is also bullish on Sterlite Technologies. "The stock has also cleared its downward-sloping trendline quite comfortably. The best part about this reversal is it has bounced back from its monthly central pivot range which has acted as massive support."
Q: Do you see a correction in the Bank Nifty if it breaks 43,300?
The structure of Bank Nifty is concerning. On the upside, it has a double-top formation near the 46,000 mark whereas at this juncture, it is on the verge of breaking a few important supports. Although there is a trend line breakdown, below 43,300, the index would confirm a breakdown from the previous demand zone, and it would sneak below its 200-day EMA (exponential moving average of 43,270). This could be further damaging.
On the upside, a close above 44,100 might negate the breakdown, and this can bring back the momentum in the index.
Yes, definitely. Since it is trading inside the Ichimoku Cloud, there is a full possibility that Nifty IT might consolidate between 31,000 and 32,000 in the coming weeks.
Levels to watch out for: 19,700 - 19,900 on the higher side, and 19,333–19,000 on the lower side
The week ended October 20 went by for the bears, as they managed to dominate the bulls in the past three trading sessions. Although the Nifty index ended the week with a loss of over 1 percent, the index closed much lower from the week’s high. Initially, the index registered a high near the 19,850 mark, but later it fell to 19,500 and ended the week near 19,550. Even the broader markets remained under pressure during the last week.
Despite the weakness, Nifty is still above the Dragon Fly Doji, which occurred a couple of weeks ago. At the same time, Nifty is hovering near the support of a rising trend line placed near the 19,500 mark. Thus, for the the current week, 19,500 might be an important support on a closing basis. A convincing move below the same might bring the swing low of 19,333, which is also the low of Doji under threat. This can be a fresh trigger for further panic.
On the other hand, above 19,700, we expect the bulls to turn a bit aggressive, and this can lead to a fresh rally towards the 20,000 mark. The coming week will be quite interesting since the index is at a crucial support level while the FII’s long-short ratio is approaching the oversold zone of 20 percent.
Traders are strictly advised to hedge their long positions since any escalation in the ongoing geopolitical crisis might reverse the markets without any intimation.
Q: Two stocks that are on your radar for this week....
City Union Bank: Buy | LTP: Rs 136.45 | Stop-Loss: Rs 124 | Target: Rs 168 | Return: 23 percent
City Union Bank has been under pressure for some time, but at this juncture, it is trading near its crucial support. Previously, the stock turned from this level, and we saw a rally towards Rs 200.
On the weekly chart, a range breakout is seen with massive volume, which is looking lucrative. Thus, we advise traders to go long in the stock in the range of Rs 134-138, with a stop-loss of Rs 124 and a target of Rs 168.
Sterlite Technologies: Buy | LTP: Rs 165 | Stop-Loss: Rs 145 | Target: Rs 200 | Return: 21 percent
Since the last 3 months, the said counter has been consolidating in the range of Rs 145-155. Recently it had given a clean breakout from the said range and is currently placed at Rs 171 levels. Having said that, it has also cleared its downward-sloping trendline quite comfortably. The best part about this reversal is it has bounced back from its monthly central pivot range which has acted as massive support.
One can buy in the zone of Rs 160-165 for a target of Rs 200 and the stop-loss would be around Rs 145 on a daily closing basis.
Q: Do you expect the possibility of rebound in Finolex Cables after recent correction?
After closely studying the chart of said counter, it looks like the worst is over as of now. Following are the reasons that echo that the worst is over.
>> At the current juncture, price action is placed near the 61.8 percent retracement of its previous upmove, which is also coming near the top of May 8, 2023, i.e. Rs 931 levels.
>> Also, bullish reverse divergence is spotted, which occurs in established up-trends. (Note: Bullish reverse divergence is when price action doesn't make lower lows but the corresponding oscillator makes lower lows.) In our case, RSI (refer to the chart).
>> Even volume is thinner during correction, which states that selling pressure is about to be seized in the coming sessions.
Q: Do you expect any correction in the Nifty Realty index?
It will be too early to predict a 10 percent correction in said index as it has taken support near 21 EMA in the previous trading session. Though it has made regular bear divergence on the daily chart near 600–620 levels (refer to the chart). If it doesn't sustain above 600 levels for at least a week, then we might see a correction until 580 levels, which is its next credible support.
Notes: Regular bear divergence occurs when bulls are exhausted. Price action makes higher highs, but the corresponding oscillator makes lower tops. In our case, RSI (refer to the chart).
Q: Is it the time for Kalyan Jewellers to correct after recent rally?
Yes, it looks like Kalyan Jewellers is overbought now. But the only major concern for bulls will be the long-wick Hanging Man kind of candlestick, which appeared at the top of the chart on October 19, 2023. In the hourly time frame, there is regular bear divergence that might call for correction till the low of the long wick candle, which comes around Rs 265 in the coming session, if it fails to close above Rs 315 levels.
So bulls need to be cautious and adopt profit booking in the zone of Rs 295–310. Fresh longs are not advised.
Notes: Regular bear divergence occurs when bulls are exhausted. Price action makes higher highs, but the corresponding oscillator makes lower tops. In our case, hourly RSI (refer to the right handed chart).
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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