On the Nifty 50, traders should remain cautious as the persistent gap openings and indecisiveness on the charts highlight the possibility of continued volatility, Sudeep Shah of SBI Securities advised.
Sunil Shankar Matkar
January 19, 2025 / 12:50 IST
Sudeep Shah is the Head of Technical and Derivative Research at SBI Securities
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Considering technical factors, Sudeep Shah of SBI Securities believes Hindalco Industries is likely to witness a sharp upside rally in the next couple of trading sessions.
Further, he believes Manappuram Finance is also likely to see the new leg of the rally, as the stock has given a Falling Channel breakout on a daily scale. “This breakout is confirmed by robust volume. Currently, the stock is trading above its short and long-term moving averages,” he reasoned.
Additionally, this head of technical and derivative research at SBI Securities picks two stock ideas for next week – Bharat Dynamics and Swaraj Engines. “Bharat Dynamics has given a consolidation breakout on a daily scale, which confirmed by robust volume, while Swaraj Engines has given a downward sloping trendline breakout on a daily scale, which was confirmed by above 50-day average volume,” he said.
Do you believe the Nifty is likely to break 23,000 next week and form bottom?
Last week, the markets experienced significant volatility as in almost all the sessions, we saw either a gap-up or a gap-down opening. As the index opened with gaps, it kept little trading room for the traders. The index has formed a small body candle in the last four trading sessions. Further, on a weekly scale, the index has formed a Doji candlestick pattern, which shows indecisiveness among the market participants.
During the week, the index has witnessed a pullback rally for three consecutive trading sessions, and thereafter, it has resumed its southward journey. Most noteworthy, during this pullback period, the daily RSI (Relative Strength Index) failed to cross the 40 mark, which is a bearish sign as per RSI range shift theory.
Going ahead, traders should remain cautious as the persistent gap openings and indecisiveness on the charts highlight the possibility of continued volatility.
Talking about crucial levels, the zone of 23,050-23,000 will act as a crucial support for the index. If the index slips below the level of 23,000, then we may witness a sharp correction upto the level of 22,700, followed by 22,500 level in the short term. While, on the upside, the zone of 23,450-23,500 will act as a crucial hurdle for the index as the 38.2 percent Fibonacci retracement level of its prior correction (24,226-23,047) is placed in that region.
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Do you see the Bank Nifty breaking 100-week EMA before getting stability?
The Bank Nifty has taken a support near 20-month EMA (Exponential Moving Average) and thereafter witnessed a minor pullback. The pullback is halted near the 10-day EMA level, and it has resumed its southward journey. This resulted in the formation of a high wave candle on a weekly scale, which indicates indecisiveness among the participants.
Most noteworthy, during this pullback rally, the daily RSI failed to cross 40 mark, which is a bearish sign as per RSI range shift rules. Going ahead, the zone of 47,900-47,800 will act as immediate support for the index. If the index slips below the level of 47,800, then the index is likely to test the level of 47,000 in the short term. On the upside, the zone of 49,400-49,500 will act as a crucial hurdle for the index.
Do you see a new leg of rally in Manappuram Finance, which rallied sharply last week?
Yes, the stock has given a Falling Channel breakout on a daily scale. This breakout is confirmed by robust volume. Currently, the stock is trading above its short and long-term moving averages. These averages are edging higher, which is a bullish sign. The daily RSI is surged above 60 mark and it is in a rising mode. Hence, we believe the stock is likely to see the new leg of the rally in the stock.
Do you expect the upward journey to begin in CG Power and Industrial Solutions and Siemens considering the Hammer formation on the weekly charts?
Yes, both the stocks have formed a Bullish Hammer candlestick pattern on a weekly scale. Most noteworthy, the volume activity is above average, which indicates accumulation at lower levels. The momentum indicators and oscillators have also suggested a limited downside for now. Hence, we believe the stock of CG Power and Siemens are likely to begin their upward journey.
What are your top 2 bets for next week?
The stock has given a consolidation breakout on a daily scale. This breakout is confirmed by robust volume. In addition, the stock has formed a sizeable bullish candle on a breakout day, which adds strength to the breakout. The momentum indicators and oscillators are also suggesting strong bullish momentum in the stock. Hence, we recommend accumulating the stock in the zone of Rs 1,280-1,270 level with the stop-loss of Rs 1,240 level. On the upside, it is likely to test the level of Rs 1,350, followed by Rs 1,400 in the short term.
The stock has given a downward sloping trendline breakout on a daily scale. This breakout is confirmed by above 50-day average volume. The daily RSI has given a neckline breakout of Adam & Adam Double Bottom pattern, which suggests strong bullish momentum. Hence, we recommend accumulating the stock in the zone of Rs 3,230-3,200 level with the stop-loss of Rs 3,120 level. On the upside, it is likely to test the level of Rs 3,380, followed by Rs 3,450 in the short term.
Do you see a sharp rally in Hindalco as the stock defended mid line of Bollinger bands on monthly charts and climbed above the same line on the daily charts?
On a weekly scale, the stock has formed a Gravestone Doji candlestick pattern in the month of September 2024 and thereafter witnessed correction. The correction was halted near the 100-week EMA level and witnessed a sharp rebound. Most noteworthy, the stock has formed a Bullish Engulfing candlestick pattern on a weekly scale, which is a bullish sign. Further, the stock is surged above its 20-day EMA level for the first time after December 2024. The daily RSI has given a horizontal trendline breakout.
Hence, considering these technical factors, we believe the stock is likely to witness a sharp upside rally in the next couple of trading sessions.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.