Mehul Kothari, AVP – Technical Research at AnandRathi
We would like to reiterate our stance that yes 16000 is a strong psychological milestone and the upside from here won’t be that easy, but, once that is taken out then purely momentum players can participate in the rally and buy on dips, Mehul Kothari, AVP – Technical Research at AnandRathi said in an interview with Moneycontrol’s Kshitij Anand. Edited excerpts:
Q) Despite volatility bulls managed to hold on to gains throughout this week pushing Nifty50 above 15900 levels. What led to the price action?
A) Well, it has been a pattern now for the bulls for the past few months. Whenever bears try to dominate a bit, bulls retaliate back by pushing markets into new highs.
The same thing happened in the Nifty50 too. Markets respected the support of 15600 and further gained strength to close at life high.
Nothing specific with regards to data (Cash and F&O) that could provide an actual reason for strength. In fact, even on the sectoral front, there were no specific heavyweights which single-handed pulled the markets. It was like a team effort.
Q) We are inches away from hitting 16000 which has acted as a stiff resistance level for Nifty in the past. What should traders/investors be doing – add more long positions post the breakout or book some profits?
A) To answer this, we would like to reiterate our stance that yes 16000 is a strong psychological milestone and the upside from here won’t be that easy.
But, once that is taken out then purely momentum players can participate in the rally and buy on dips.
However, once we start approaching the 16300 – 16500 zone then we would turn extremely cautious on the markets since the VIX is trading near a multiyear support zone of 12 - 10.
Sooner or later there could be a spike in volatility. Also, the heavy positions by the Retail participants in the stock futures hint towards over-optimism in the markets.
Thus investors/positional players should wait for a considerable dip from 16000 and plus levels to go aggressive with long bets.
Q) In line with benchmark indices, small & midcaps indices also touched fresh record highs. What is driving price action in the broader markets?
A) With the DIIs being constant buyers; it seems to be a broad-based buying happening in the markets. Many individual stocks making their fresh 52-weeks high or lifetime high are attracting more and more buying interest.
However, as we discussed in our previous interaction the NIFTY500 index is approaching a major hurdle on the larger degree chart. In addition, the NIFTY MIDCAP 100 index indicates some early signs of exhaustion in the coming weeks.
Thus we are of the opinion that by the end of July or the first week of August 2021, there is a possibility of some dip in the Midcap and Small Cap space.
Q) Sectorally, Realty index surged more than 7% during the week. What is leading to the price action in that sector and top stocks which are looking attractive? If someone wants to invest in the sector should they wait for a dip or invest at current levels?
A) During the previous week we discussed the NIFTY Realty index and the breakout in the index helped it to pose a massive gain of over 8 percent. In fact, we covered DLF which is a heavyweight in the index surged more than 10 percent and met our target of 320.
For fresh buying one should wait for a dip since the risk to reward ratio is not favourable at this point in time. Stocks like DLF, Godrej Properties, Oberoi Realty, etc. can be kept on the radar for buy-on dips.
Q) TCS, Infosys and Wipro have come out with their results. Which one is looking better on the charts?
A) TCS is the only IT heavyweight which underwent a decent correction in recent time. Thus in comparison to other stock; TCS looks lucrative with a stop loss of 3000 for some fresh upside of over 10%-15%.
Q) Your top 3-5 trading ideas for the next 3-4 weeks?
A) Here is a list of top trading ideas:
BPCL: Buy above Rs 451| LTP: Rs 447.95| Stop Loss: Rs 435| Target: Rs 480| Upside: 6%
Off late, the OMC stocks have been in a corrective mode and that is the reason why even BPCL gave up almost 10% from the recent top of 494.
At this juncture; the stock is hovering near a rising trend line support on the daily chart. In addition, this support coincides with the placement of 89 DEMA.
There is a possibility of a fresh rally in the stock but that requires confirmation. Thus traders can buy the stock ONLY above 451 with a stop loss of 435 for an upside target of 480.
Godrej Properties: Buy| LTP: Rs 1577| Stop Loss: Rs 1480| Target: Rs 1780| Upside: 12%
Even in our previous report, we covered DLF from the Nifty Realty Pack since the index gave a major breakout. Even the stock Godrej Properties is a heavyweight from the index and is poised for a fresh move.
We expect a faster move in the stock once it closes above 1580. Traders can go long in the stock at the current price with a stop loss of 1480 for an upside target of 1780.
RIL: Buy| LTP: Rs 2110| Stop Loss: Rs 2040| Target: Rs 2250| Upside: 6%
The stock would be in limelight due to the upcoming results. Technically it is turning from the support of 89 DEMA and has a small range breakout in the hourly time frame.
Even the level of 2000 is a very strong psychological support for the stock. Aggressive traders can go long in the stock at the current market price with a stop loss of 2040 for an upside target of 2250.
Disclosure: MoneyControl is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.Disclaimer: The views and investment tips expressed by 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.