Edited excerpts from a chat:
The one-day-up and one-day-down pattern broke this week with Nifty rallying for four consecutive gains. Are we staring at fresh all-time highs in the week ahead? What can disrupt this leg of the upside?
The previous pressure point near 22,100 is expected to trigger rejection trades, but Friday’s wobbliness suggests that even this has already been priced in, and has probably cleared the path for a smooth sail to 22,450-550 initially, with a minor resistance spotted near 22,250. The downside marker shall remain at 22,835, the closest congestion point of note. The known risk to this trajectory is the possibility that further hurdles may appear that may claw back rate cut expectations. Last week’s US economic releases have been favourable though, but given a long streak of upsides, setbacks to rate cut expectations could render the uptrend vulnerable to corrections, especially with a spate of elections scheduled across the globe, as well as El Nino forecast this year.
Bank stocks have started to outperform with some participation from private bank stocks as well while PSU banks remain unbeatable. Do some chart reading for us.
If the uptrend in the broad market were to resume, private banks stand the most to gain, with the Nifty private bank index having closed above 20-day SMA for the first time since 16th January. We noted last week that the uptrend in the PSU banks is far from over, given the strength of the directional moving indicators, but they are poised for a time correction.
Smallcaps have begun to underperform, going by the performance of Nifty and Nifty Smallcap 100 indices this week. Do you see more profit booking in smallcaps and value buying in the largecap private bank stocks?
Nifty Smallcap 100 index’s fall from an all-time high level was arrested around 15,227 and the recovery saw price ending above 61.8% Fibonacci retracement level of 16,123 which is positive. While 65% of the Nifty Smallcap100 stocks are still trading above 20 and 50 DSMAs, 50% of the stocks saw positive closing this week. The average RSI of weekly losers is around 48 and gainers is around 54 hinting that no big moves may happen on the downside. We feel that the smallcap index is likely to remain positive as long as it stays above 15650 in the short term.
Largecaps like HDFC Bank, ICICI Bank, Axis Bank, and IndusInd Bank, which together form around 60% of BankNifty, saw Long Buildup or Shorts being covered on a week-on-week basis. Delivery buying has started to pick up this week in the case of HDFC Bank and IndusInd Bank. The Nifty Private Bank Index has seen a hammer candle in weekly charts near the rising trendline, supporting our positive bias.
ITC shares fell below the Rs 400 mark on Friday. Given all the talks over the BAT stake sale, do you see more downside pressure in the stock after looking at volumes and delivery data?
Having topped out in late 2023 followed by rejection trades on approach to the peaks in early 2024, ITC is on its way down, our comfortable buying region would be near 315. However, last week’s consolidation accompanied by higher volume, followed by a Doji on Friday, points to a reversal move potentially aiming for 430, especially with positive divergence visible in ROC.
Give us your top trading ideas for the week
WIPRO (CMP: 543)
View: Buy
Targets: 560 – 590
Stoploss: 528
The consolidation that we saw in the stock during the July 2022 and November 2023 period was breached in December 2023 which is continuing. The stock is trading above its 20 and 50-month SMAs. Also, we have seen a Supertrend breakout in the monthly time frame adding strength to our expectation of further upside. We expect the stock to move towards 590, the 61.8% Fibonacci retracement level of October 2021 high and March 2023 low, in the coming weeks. All longs may be protected with a stoploss placed below 528 levels.
IPCALAB (CMP: 1241)
View: Buy
Targets: 1285 – 1330
Stoploss: 1204
The stock has been on a reversal since May 2023 and after a minor consolidation in November, we have seen a breakout of the same hinting at more upsides in the coming weeks. A bullish Marubozu candle in the daily timeframe reinforces our assumption of more positivity in the coming weeks. We expect the stock to move towards 1285 and 1330 in the next few weeks. All longs may be protected with a stoploss placed below 1204 levels.
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