Nifty PSU Bank index, which lost 1% in last week’s market fall, may require consolidation before a further directional move, says Rohan Patil, Technical Analyst, SAMCO Securities. “The buy-on-dips strategy makes a good investment in the current scenario. The immediate support for the PSU Bank index stands at 3,900 levels and a break above 4,600 will make further higher high formation in an index,” he says in this chat with ETMarkets. Edited excerpts:
Both Nifty and Nifty Bank ended the first week of 2023 on a negative note. What are the weekly charts telling you about the week ahead? What are the key levels to watch out for?
Nifty50 remained volatile last week and kept trading below its important psychological levels of 18,000 mark. On the daily chart, the index has breached its smaller degree trend line support, which is placed at around 18,050 levels and post that, significant selling was witnessed.
Both Nifty and Nifty Bank ended the first week of 2023 on a negative note. What are the weekly charts telling you about the week ahead? What are the key levels to watch out for?
Nifty50 remained volatile last week and kept trading below its important psychological levels of 18,000 mark. On the daily chart, the index has breached its smaller degree trend line support, which is placed at around 18,050 levels and post that, significant selling was witnessed.
If we observe a broader time frame (weekly chart), the front-line index is trading between the 9 & 21 EMA, which is placed at 18,070 & 17,826 levels. From the past three weeks bears are making a strong attempt to drift it below 17,800 levels but 21 EMA is acting as an anchor support for the Index.
As in the first week of November 2022, Nifty posted a strong breakout above 17,600 levels and registered a life-time high at 18,887.60 without any meaningful correction. Presently the current selloff can be considered as a throwback of the bullish pattern.
The validity of the bullish pattern stands above 17,600–17,500 levels. If in case, the front-line index closes below these levels, then the gate is wide open till 17,200–17,000 levels. On the higher end, resistance is capped at 18,250 levels. Break of that level will trigger a buy signal towards 18,500 levels or even higher.
The Banking Index was under immense selling pressure and on the weekly chart, it underperformed against the benchmark index. Bank Nifty has closed below 9 & 21 EMA on the daily chart but on the weekly time frame, index is trading above its 21 EMA which is placed at 41,017 levels.
The overall trend is bullish as prices are trading within the rising channel pattern with higher high higher bottom construction on the weekly scale. The immediate support for the banking index is placed at 41,500 & 41,000 levels. Any sharp move below these levels will be an alarming sign for the banking index. On the higher end, resistance is capped at 43,500 levels. A break of that level will trigger a buy signal towards a new all-time high.
PSU stocks seem to be unstoppable ahead of the Budget. Do you see profit booking possibilities in PSU bank stocks by the end of the month?
The upward trend in the PSU Bank index was backed by good participation from investors, making the rally sustainable. The trend for the medium term looks extremely positive as the index continues its higher high higher bottom journey on the weekly time frame.
Currently, we are not expecting any major correction or profit booking in PSU Bank index but may require consolidation before a further directional move. The buy-on-dips strategy makes a good investment in the current scenario.
The immediate support for the PSU Bank index stands at 3,900 levels and a break above 4,600 will make further higher high formation in an index.
How should one play IT stocks ahead of the result season that begins from Monday?
Nifty IT index on the daily chart has witnessed a bearish head & shoulder pattern breakdown and prices on Friday’s session have closed below its neckline which is placed at 28,200 levels.
The majority of IT stocks which includes
, and have shown a negative breakdown on the daily chart and the daily momentum indicator is in a bearish crossover, suggesting weak price momentum for the near term.
We expect volatility will be on the higher side during the result season, beginning next week, and traders are advised to act with caution.
How does chart look like after the pressure seen on Thursday and Friday?
Bajaj Finance has shown a negative breakdown on daily as well as weekly chart as bears were aggressively hammering the prices from the higher levels and closed with loss of 9 percent on the weekly closing basis.
In the lower panel of the chart, the Relative strength Index (RSI) which measures the strength of the trend, is currently reading in an extremely oversold mode and an immediate oversold bounce from current levels cannot be ruled out till 6,300 – 6,350 levels. The overall trend remains negative until the stock closes above 6,750 levels.
Which are the 3-4 key stocks that would be on your radar in the week ahead?
BUY . CMP: Rs 115.65 – 115. Target price: Rs 121.50 – 124. Stop loss: Rs 109
Tata Steel on the weekly chart is unfolding in a symmetrical triangle pattern breakout with above average volumes.
Among oscillators, the weekly RSI has generated a bullish crossover recently, along with trend line breakout thus validating the positive bias.
Counter is trading above its 9 & 21 EMA and on the other hand NIFTY METAL Index is outperforming the Benchmark index.
BUY . CMP 711.90 – 706, TARGET 727 – 735, SL 685
Prices on the daily chart manage to surpass previous swing high with above average volumes, this indicates strength in the current breakout.
In classical technical terms, the stock has witnessed a rectangle pattern breakout and trading above the upper band of the pattern.
Stock is trading above its 21 & 50 EMA on the daily as well as weekly time frame. RSI moving higher and sustaining above 60 levels.
BUY . CMP 741.55 – 735, TARGET 772 – 785, SL 698
on the daily chart has witnessed an inverted head & shoulder pattern breakout and prices are sustaining above its neckline support.
Among oscillators, the daily RSI has generated a bullish crossover recently, along with trend line breakout thus validating the positive bias. Stock is trading above its 9 & 21 EMA on the daily as well as weekly time frame.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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