Edited excerpts from a chat:
Nifty managed to recover losses made on March 19 after showing support near the 21,700 mark. Do you think the index can maintain the 22,000-plus zone in the week ahead?
The bounce off the 68% retracement fibo of the year’s high-low last week, brought forth an improvement in risk appetite, that helped Nifty register two days of a positive close above the 50d SMA. This takes a lot of bearishness that was looming over the last week. That said, we will maintain our last week’s view that a turn lower from the top is still likely, and with March derivatives expiring next week, directional moves may be less forthcoming, limiting our optimistic upside targets to 22,400-500. Downside markers may be placed near 22,920, until above which, a buy-on-dips approach could be taken early in the week, while a direct fall below 21810 region could force us to reconsider 21,400-20,900 as downside objectives.
The coming week will have only 3 trading days due to two holidays and two long weekends. Given that there would be a monthly expiry as well, do you see above-average volumes on the 3 days?
Usually, weeks interrupted with more than one holiday do get a day with high volatility, but not necessarily high volumes, as big bets stay away due to the lower trading horizon. The upcoming expiry of March derivatives along with Fed speeches present a case for higher volumes, but with last week witnessing volumes way below the month’s average on all the days of the week, the trend of subdued volumes is likely to continue for most of the days, unless Nifty breaches 22,500 on the upside, or cracks below 21,700.
Unlike Nifty and Nifty Bank, the IT index failed to recover and ended the week down about 6%. Would you prefer short positions in the likes of Infosys and HCL Tech?
The Nifty IT index has closed below the 38% Fibonacci level and with MACD slipping below the signal line, confirming weakness. The number of stocks trading below 100 DSMA has increased from 20% last week to 50% this week, suggesting that the sector has had a significant turn in fortunes already. In fact, 60% of the stocks in the NSE IT index are trading below the 30-day low.
Meanwhile, Infy is at the 61.8% fibo of the October 2023 low and February 2024 high which is offering support, Further, 14d RSI being at 28, the odds of a pullback is higher, discouraging shorts at the present level. For HCL Tech on the other hand, a long-legged doji is seen in the daily charts, which is a reversal sign, but the resistance at 1570 appears strong for now. Weekly MACD has crossed below the signal line which is a bearish signal. We would prefer short in HCL Tech on pullbacks.
Smallcaps, microcaps and midcaps outperform again in the week despite all the noise related to valuations and stress tests by mutual funds. Does the trend look sustainable?
In the case of midcap index, the number of stocks trading below 20 DSMA has fallen to 66% this week from 81% last week, while those with 14 days RSI below 50 fell to 67% from 79% and those above 50 rose to 33% this week from 21% last week. In the case of smallcap index the number of stocks trading below 20 DSMA has fallen to 73% this week from 92% last week, while the number of stocks with 14-day RSI below 50 fell to 71% from 99% and those above 50 rose to 28% this week from 11% last week. Both the indices are near the 14-day SMA, usually a rest point for pullbacks, which can potentially act as a reversal point too. But in the case of the smallcap index, MACD is about to cross above the signal line from below, and we are hopeful of the maturity of the same. Towards this end, smallcaps could lead in the case of extension in the recovery rally.
What would be your top ideas for the week?
TECHNOE (CMP: 705)
View : Buy on dips to 690
Targets : 750 – 774
Stoploss : 669
After touching an all-time high in February, the stock witnessed profit booking. It had retraced towards the 61.8% Fibonacci level of 630 recently and a pullback in underway. Also, the MACD weekly histogram is showing signs of Bullish exhaustion favoring our view of further upside. Since the recent move has been swift entry could be planned on a pullback towards 690 levels. We expect the stock to move towards 750 and 774 levels in the next few weeks. All longs may be protected with stoploss placed below 669.
GPIL (CMP: 682)
View : Buy
Targets : 720 – 750
Stoploss : 658
The stock has been on a decline since February 2024 and seems to be building a base near 660 which is evident from multiple Doji candles being formed around those levels. 14-day RSI has turned around from the oversold region with MACD histogram too seeing bullish exhaustion in daily as well as weekly time frames. A hammer candle in the weekly periodicity is also painting a rosy picture for the stock in the near term. We expect the stock to move towards 720 and 750 in the next few weeks. All longs may be protected with stoploss placed below 658.
