“Doing the first phase of consolidation we may re-approach the November 21 lows of 23263, but are less likely to break it this week,” says Anand James, Chief Market Strategist, Geojit Financial Services.
Edited excerpts from a chat:
A bullish reversal pattern is clear next week on the charts. Do you think Nifty is on track to break the November 21 lows of the 23,263 level in the week ahead?A strong fall and close below 200 SMA on Friday has obviously brought in fears of an extended period of downsides. But, favoured view sees higher prospects of a sideways move with reasonable potential for a pull-back. Doing the first phase of consolidation we may re-approach the November 21 lows of 23263, but are less likely to break it this week.
Volumes are likely to be lower than usual in the days ahead due to Christmas and New Year Holidays. How would you go about trading Nifty monthly expiry?
Rollovers on Friday were the lowest when compared with last two expiries’ similar periods, suggesting that the steepness of the fall may have delayed positioning for next month. At 31%, FIIs’ longs in index futures are at their lowest this month so far, but we did not see an urgency in liquidation on Friday. Neither did VIX rise alarmingly, all of which suggest that pain may ease in the Christmas week.
Do you still have hopes of a Santa rally?
I do have hopes of relief from the ongoing pain initially, with fair prospects of a pullback in Nifty to 24,400, but it might be too much of an ask for the next week.
Nifty PSE index and Nifty PSU Bank were among the worst hit among major sectoral indices. Do you see PSU stocks hitting oversold levels?
The Nifty PSU Bank index lost around 10% since the first week of December. The index is now exactly at the 61.8% Fibonacci retracement level of November low and December high. The 14-D RSI of the index is at 36 and is closing in on the oversold region in the daily periodicity. If we look at the constituent heavyweights like SBI, Bank of Baroda, PNB, IOB, Canara Bank and Indian Bank, which form around 75% of the index, they are trying to make a base around the 61.8% Fibonacci retracement level and the average RSI of these stocks is around 44. All these are hinting at a near-term bounce back which could possibly gain pace in the second half of next week.
With Asian Paints hitting 4-year-low levels, do you see some chances of bottom-fishing at lower levels? What are the charts indicating at?
Yes, we see a turn higher in Asian paints, putting an end or a pause to the ongoing and sustained down move. It might take a few days more or so, as the weekly charts’ oscillators indicate, but bottom fishing is encouraged with a downside marker placed near Rs 2227.
Give us your top ideas for the week ahead?
Buy NTPC (333)
Target – 355
SL – 319
The stock has been on a pullback since September and has been making lower highs and lower lows. Currently, the stock has moved into the oversold region and is expected to see a pull-back. SMIO also has shown the first indication of a pullback. We expect the stock to move towards 355 and all longs may be protected with stoploss placed below 319
Buy ASTERDM (486)
Target – 525
SL – 468
The stock has been making higher tops and higher bottoms since July and recently broke above the declining trendline resistance hinting at more upside. Keeping apart Friday’s pull -back, the trend is still positive with SMIO attempting to move above zero line. We expect the stock to move towards 525 in the next few weeks. All longs may be protected with stop loss placed below 468 levels.
