What an exciting week particularly for the mid and small cap traders.
Absolutely. It was a breathtaking week for the markets. The markets were very sluggish in the last two months. There was hardly any kind of trend. It was as if the markets were completely lifeless.
The Nifty was moving in a band of 200-250 odd points and then at the start of August we saw a completely different change in the markets.
Nifty not just broke out of that 16,000 mark but it has also broken out of that range bound behaviour on the index.
Now there are a lot of positives to take away from the markets in the last two weeks. One of them being the emergence of fresh solid large cap names.
Many stocks such as
, ITC, , Sun Pharma and TCS made a very strong comeback specifically this week. So many large cap names which were erstwhile very docile have made a very strong comeback.
On the derivatives data as well in the last nine trading sessions from the time the Nifty has hit that 16,000 odd mark the open interest on the Nifty has swelled or increased by 32%.
This is one of the more consistent rises in the open interest on the Nifty futures and this indicates that there are many takers for the index futures on any kind of dips or even on rises.
Traders are more confident in carrying forward long positions. So all in all it just indicates that the markets have more headroom to move up higher. With the market breadth being a bit shallow than what was earlier, traders should be more confident on the large cap fronts rather than midcaps and small caps.
This week metal stocks were in focus. They have been shining brighter not just because of positive news coming in from the US of the infrastructure bill but also the earnings. According to you which are the winners and losers and which stocks are likely to be in focus going forward for the coming week?
If we look at the metal index it is making a fresh high for itself which could generally mean that many of the components of the metal index are also making new highs for themselves. But actually that is not the case. We still have very staggered moves even in a sector like metals.
In the last two months when the markets were consolidating the metal index and many of its components were making fresh highs for themselves. But in the last two weeks the sector has got a bit more polarised.
For example, we saw Tata Steel moving back into strength almost at Rs 1470 plus mark in the last half an hour of trade. We saw strength coming back into names like Hindalco and
in the second half of this week.
But there were also underperformers like SAIL and Hindustan Copper which are trading significantly below their previous swing highs. Nalco also has been trading almost 15% below its previous major swing highs.
So I think that traders should take into consideration that these mid cap names may not be able to catch up.
I think the large caps would continue to move up higher and this divergence between large caps outperforming the midcaps is likely to increase for this sector as well.
As we enter the new week what recommendation have you brought for our viewers, what are your stock picks for the coming week?
I would like to recommend three stocks. The first one is a buy on Reliance Industries. I think the stock has witnessed a fabulous move on Friday. The stock is nearing a very interesting swing breakout on the daily time frame chart and if the breakout is successful, possibility of the stock coming back towards even Rs 2250, Rs 2300 levels over the near term is quite possible.
So I would suggest a buy on Reliance Industries. I am anticipating almost a 100-point uptick. Traders should buy with the target of Rs 2240 and should keep a stop loss at Rs 2100 levels.
The second is a buy on UPL. I think even this stock has looked very strong and formidable. We have seen the stock forming an inverse head and shoulder pattern on the hourly time frame charts. I would suggest a buy, more of an anticipated breakout with the targets of Rs 825 and a stop loss should be kept at Rs 750.
The third stock is from the midcap pack. It is a buy on SML Isuzu. The stock is forming a classical bullish pennant formation on the daily time frame charts. It did fabulously well on Friday’s trading session, closing up almost 3% or 4% higher and is nudging towards this breakout. It is showing a bullish pennant formation so I would suggest a buy on SML Isuzu as well, with targets of Rs 680 and a stop loss should be kept at Rs 580.
