A bearish divergence was formed between price and technical oscillators on the daily time frame in the small & midcap indices that suggests some sort of cool off to the rally cannot be ruled out in the days ahead before the uptrend resumes, Abhishek Chinchalkar, CMT Charterholder at FYERS said in an interview with Moneycontrol’s Kshitij Anand.
Q) Nifty surged to fresh record highs but we got a hint of profit-taking as the index inched closer towards 15000 while for the Sensex it was 50,000. How do you sum up last week’s action?
A) The market consolidated in a tight range in the week gone by, portraying signs of indecisiveness following decent price gains over the past couple of weeks.
The first half of the week was characterized by several market sectors rising to fresh lifetime/52-week highs. However, the upside momentum faded in the second half of the week and most sectors witnessed profit booking, including market heavyweight Private banks and IT.
Furthermore, there was a steady rise in India’s VIX over the course of the week, which indicates that nervousness is creeping into the markets.
Q) How is markets likely to pan out in the coming week – any important levels which one can track? Also, can Sensex/Nifty hit 50,000/15000 respectively ahead of the event?
A) The price action in the week gone by suggests that one must now take a cautious stance. While the markets broadly consolidated at record highs, this consolidation was accompanied by a steady rise in VIX, which is a cause of concern.
Looking at the weekly time frame, several indices formed Doji and Spinning Top candlestick patterns. Meanwhile, Nifty and Sensex also formed a bearish Spinning top candle.
Individually, as these candles are appearing at the top, they warrant taking a cautious stance until the highs of the candle are surpassed.
On to intraday time frame, both Nifty and Sensex have formed a lower high and lower low sequence, which indicates that we could see a minor correction in the next few days.
The immediate levels to watch out for are 14435 for Nifty and 49070 for Sensex. If the indices sustain below these levels, we could see a correction towards 14000 and 47800, respectively, in the days ahead.
Alternatively, if markets manage to surpass the highs of the week gone by, then the bullish bias will resume. In such a case, we could see Nifty hitting 15000 and Sensex 51500 by the Union Budget.
Q) Small & midcaps witnessed some profit-taking in the week gone by. Can this accelerate as we move closer to the event?
A) Both Midcaps and Smallcaps are in an immensely powerful uptrend, with every minor dip being strongly absorbed. At the time of writing, the weight of the evidence suggests that the overall uptrend remains intact.
That said, in the week gone by, Midcap and Smallcap indices formed bearish weekly candles. Furthermore, a bearish divergence is seen forming between price and technical oscillators on the daily time frame.
Based on these, some sort of cool off to the rally cannot be ruled out in the days ahead before the uptrend resumes.
Key levels to keep an eye on is 21800 for Nifty Midcap 100 index and 7350 for Nifty Smallcap 100 index. If the price sustains below these levels, we could see a 3-5% correction in the next few days.
Q) Your 3-5 trading ideas for the next 3-4 weeks?
A) Here is a list of top trading ideas for the next 3-4 weeks:
ITC: Buy| LTP: Rs 215| buy near Rs 215| Stop Loss: Rs 205| Target: Rs 230| Upside 7%
ITC broke above the neckline of a major Inverse Head & Shoulder pattern in November 2020 and has since been in an uptrend. Over the past four weeks, it has broadly consolidated between 200 and 218.
The stock is now edging closer towards the upper end of this consolidation zone with a nice uptick in volume. A break above this consolidation range would signal at a continuation of the rally.
UPL: Buy| LTP: Rs 522| Buy at Rs 520| Stop Loss: Rs 490| Target: Rs 570| Upside 9%
UPL broke and closed above the neckline of an Inverse Head & Shoulder pattern in the week gone by. The breakout has also been accompanied by an expansion in volume, which is a positive sign.
Looking ahead, as long as the stock holds above 493, we can expect the rally to extend further.
Bajaj FinServ: Sell| LTP: Rs 8631| Sell at Rs 8700| Stop Loss: Rs 9000| Target: Rs 8200| Downside 5%
After a strong rally in November 2020, Bajaj FinServ has shown signs of fatigue. For the past eight weeks, the stock has consolidated, with rallies above 9000 being met with profit booking.
On the daily time frame, the stock has formed a lower high. A break below 8560 would form a lower low as well, which would signal a short-term price correction in the days ahead.Disclaimer: Abhishek Chinchalkar does not hold positions in any of the stocks that are mentioned above.
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