ETMarkets Smart Talk: Expect big swings in Nifty ahead of the Budget session, says Rohan Patil
“Traders should use a hedging strategy that tries to limit risks in financial assets. One can opt for a Bull Call Spread Strategy in indices and stocks as a structural view for the market is bullish,” he says. Edited excerpts:
Nifty faced resistance around the 18,180 mark last week. Do you see the index being non-directional in the week ahead? What are the key levels to watch out for?
NIFTY50 on the daily chart has found resistance near the upper band of the Triangle pattern and prices witnessed some profit booking after showing a fine up move from 17,880 to 18,183 levels. The broader range has been the same but buying has emerged on the daily chart where the index has shown optimism to sustain above 18,000 levels.
The indicators and oscillators have turned flat without indicating any short-term directional move. The momentum oscillator RSI (14) made an attempt to move above 50 levels but the attempt failed as the index was not able to close above its previous day’s high.
Nifty on the weekly chart is placed between a broader high-low range of 18,200 -17,800 levels from the past 4 weeks. Furthermore, the price is also trapped between the 9 & 21 EMA bands which suggest a break on either side will decide further directional move in the index.
PSU stocks were among the top gainers in the week with the Nifty CPSE index rallying around 3.5%. Do you see momentum sustaining ahead?
The Nifty CPSE index is trading above its long-term upward-rising trend line within the higher top higher bottom formation which indicates a structural uptrend for the index.
Recently CPSE index has witnessed a breakout of a multiyear-long horizontal trend line on the monthly time frame which suggests any dip in the index can be used as a buying opportunity.
Though majority of PSU stocks have moved recently but there is still a lot of steam left.
Investors can stay invested with a medium to long-term view as some PSU stocks have an upside of nearly 25 – 30% in the coming quarters.
IT stocks have been in momentum in the last few weeks. What is the outlook going ahead?
Yes, Nifty IT Index has been in momentum for the last couple of weeks and has witnessed a rectangle pattern breakout on the daily scale. Post breakout, IT index shut its shop in green for four out of five trading sessions.
On the broader time frame (weekly), IT index is forming a smaller degree rounding bottom formation and prices are sustaining above its 9 & 21 EMA which are acting as an initial support zone for the IT index.
Based on the above technical study, the IT index is likely to continue its upward momentum until and unless prices don’t close below 27,900 levels.
was among the top losers in the BSE500 pack in the week. Do you see recovery led by bottom-fishing or more pain ahead?
NYKAA on the weekly chart is continuously trading in a perceptual lower high lower low formation post its listing day. Prices are trading below their medium- and long-term averages and trending lower.
The momentum oscillator RSI (14) suggests prices are trading in an oversold zone. But when a particular stock or index is continuously trading lower than the oscillator can remain in an oversold zone for a longer period.
Technically every rise in the price should be considered a fresh selling opportunity in the counter until prices are not closing above its 21 EMA which is presently placed at 180 levels.
What would be your trading strategy ahead of the Budget?
While analyzing the broader time frame Nifty is clearly on the bullish side but prices are trading in a narrow range for the past few weeks.
As we are approaching the Budget session volatility will be on the higher side and big swings can be expected in the coming trading sessions.
Traders should use a hedging strategy that tries to limit risks in financial assets. One can opt for a Bull Call Spread Strategy in indices and stocks as a structural view for the market is bullish.
Which are the 3-4 stocks that would be on your radar for the week?
BUY OIL, CMP 235 – 231, TARGET 241 – 247, SL 223, TIME FRAME 1 – 2 MONTHS
OIL on the weekly chart has given a horizontal trend line 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 CPSE Index is outperforming the Benchmark index.
BUY IMFA, CMP 305.85 – 300, TARGET 316 – 323, SL 287, TIME FRAME 1 – 2 MONTHS
Prices on the weekly chart manages to surpass previous swing high with above average volumes, this indicates strength in the current breakout.
In classical technical term stock has witnessed a rectangle pattern breakout and trading above the upper band of the pattern.
Stock is trading above its 9 & 21 EMA on the daily as well as weekly time frame. RSI moving higher and sustain above 60 levels.
BUY , CMP 566 – 558, TARGET 576 – 581, SL 545, TIME FRAME 1 – 2 MONTHS
After registering a high of 610 levels prices started to deteriorate from the high and drift lower towards 540 levels.
The price action in DABUR on 20th January shows a strong breakout of falling wedge pattern on the daily time frame.
The momentum oscillator RSI (14) has formed a rounding bottom formation with bullish crossover on the daily chart.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
