How worrisome was last week’s decline for the sustenance of the bull run? What do the charts tell you?
Anand James: The break of 22000 in Nifty did bring in jitters, and the recovery swing on Friday failed to push much above our upside marker of 22095. Seen in isolation this suggests that the 21500 trajectory that we had set out with on Friday continues to be in play. However, the formation of an inside bar, especially at the Bollinger band extremity, gives us a whiff of hope that a relief rally aiming 22223-22400 is likely to unfold in the early part of next week. Similar set up in oscillators as well as directional moving indicators were seen in late April, when a vertical recovery from 21777 unfolded. Rise in VIX to 18.4 is certainly a point of concern though and assures more volatility.
Nifty PSU Bank index was among the biggest losers in the week. Do you see some value buying at lower levels now?
Anand James: PSU Bank stocks were the worst performers this week led by selling seen in PNB, IOB, Union Bank, Canara Bank and Bank of India. Bigger cuts in PSU Bank Index was arrested due to a strong pull back seen in SBI which forms around 44% of Nifty PSU Bank index. As 83% of PSU Bank index stocks are nearing the oversold region, SBI is witnessing strong pullback and Nifty PSU Bank Index bouncing off the rising trendline support of 7003, we are going to see a pullback in PSU bank stocks in the near term. We expect the Index to bounce from current levels towards 7400-7600 levels with crucial downside levels marked around 6990. Stocks that could lead the reversal are SBI, Bank of Baroda, PNB, IOB, Union Bank, Canara Bank, Bank of India and UCO Bank.
The non-stop rise in India VIX has been a hot topic of discussion. What signals are you deriving out of it as far as the movement of Nifty is concerned for the remaining part of the May series?
Anand James: More than the continued rise in VIX, it is the dramatic drop to record low and the swing thereof in a short span of time, that has caught the eye of the traders. The rate of change of VIX is high enough to assure that we will be seeing a reversal in VIX that could curb wild moves in Nifty for the rest of the May series, especially as the electoral outcome would be known only after May expiry. That we have three contracts, by way of May and June monthly contracts as well as June’s 1st weekly contract to play the electoral outcome should also help towards easing out volatility. For now, June monthly contract has become active with good delta in the OTMs, but it seems that the weekly contract will take another week or two to become active.
Following two successive days of rally, do you think Paytm has hit a bottom in the near-term? What are the targets?
Anand James: Patterns do not suggest so, at least not yet. For now, we only know that there is exhaustion, having turned higher from the lower extremity of the Bollinger band, which is usually classic set up for reversal. But for a stock that has been under the pump for so long, we need to see more credible patterns and confirmations from other indicators to follow the rise. That said, the present set up does favour following upsides until 399-409 before the run loses steam.
Give us your top ideas for the week.
STLTECH (CMP: 121)
View : Buy
Targets : 126 – 132
Stoploss : 114.5
The stock has been on a decline since 2021 and is trying to form a base near the long term rising trend channel support. In the short term, the stock has formed an inside bar candle after the week long dip and the MACD histogram is showing signs of exhaustion at lower levels hinting at a pull back in the near term. We expect the stock to move towards 126 and 132 in the next few weeks. All longs may be protected with stoploss placed below 114.5 levels.MARICO (CMP: 587)
View : Buy
Targets : 610 – 635
Stoploss: 557
The stock has been moving within a downward sloping trend channel since September 2023 and saw a break of the channel resistance this week. This week’s upside has pushed the extreme short term momentum indicators into the overbought zone. However, weekly and monthly charts are looking promising with downward sloping channel break in both time frames. Given the overbought situation, it is advised to enter the stock on dips towards 575-570 levels. We expect the stock to move towards 610 and 635 in the next few weeks. All longs may be protected with stoploss placed below 557 levels.