For most of the week, we hovered in green territory. It was only during the last two negotiation sessions that the atmosphere deteriorated. Nifty is below 17200. Is the trend still bullish and is the risk-reward favoring the long position now?
I think the risk-reward ratio is still in favor of many long positions. Typically we say never run a dull market, we just went through five days of consolidation on the Nifty where the Nifty remains in a 2% band.
Now this comes in context over the last few weeks and over the last month and a half where the indices opening tick was only around 1% to 2% and now we’re in an area where the band net trading price for the index is around 2% on average. That’s why I think it becomes very difficult to try to anticipate which way the markets would turn, but when I look at the charts, when I look at the indicators, the breadth of the market, the type of sector movements we’ve seen in the last week, although it’s been a more lukewarm week for the indices, but when you look at the sector churns, there’s been some good returns in terms of sectors.
The Nifty IT index succeeds in reversing the trend, you have the pharma index which has seen a good recovery. Metals stocks have done reasonably well so when you look at these kind of strong sector moves as well as the global charts it just gives an indication that markets would likely break out again higher after this consolidation so wait for 17350 are removed to create an index trade, but the bias remains bullish whether it is a specific security or the overall front of the index.
What is your view on Nifty Bank as it underperformed three out of four weeks. Your call was to sell Nifty Bank at these levels. What are the important markers you follow in this regard?
Over the past couple of days I’ve felt some weakness coming back into the banking index due to the weakness that was there in the names of the private sector banks now whether it’s like Kotak Bank coming back to its two weeks, three week low for itself or if it’s a guy that couldn’t break above its 200 day moving average.
In fact, not even Bank Nifty was able to convincingly break above its 200-DMA, which means you know the bank index setup wasn’t very encouraging. Now when you’re in an area where the indices are consolidating you have to look for those weak spots or the weakest sectors and Bank Nifty was emerging to be one of the weakest sectors there that’s why I had called to try and watch the sell on Bank Nifty with a target range around the 35,000 mark.
We more or less tested that 35,000 mark on Bank Nifty on Friday as well, which just means we are now back to the lower end of the trade or Bank Nifty range. So in terms of levels, 35,000 could be good support for Bank Nifty and the closer we are to support, the higher the risk-reward and the better the risk-reward for contrarian trades. Now whenever we are trading within a range it is safer to look at more contrarian trades when the indices are trading near support or resistances so in this case 35000 is support for Bank Nifty and I think maybe next week we could see Bank Nifty heading towards at least 36000-36500 on the index.
We have seen wild moves with regards to this particular product as well as any kind of semblance or any kind of believable levels that are suggested by the charts for raw in the future?
Over the last two or three days there have been some very volatile moves for crude so from a level of 110-112 we manage to move to 120-124 on Brent crude and from 124 , I think over the weekend we were almost at 117-118 levels for crude, so those are very wild swings when you look at this type of asset class.
But it’s just that when I look at the charts for crude and I’m talking about it from a very short-term perspective, like over the last two days, it’s that the 120-124 band has been huge resistance for crude and it hasn’t been able to break above those kinds of levels.
In fact, over the past couple of days, crude has managed to show a lot of formations above that 120-124, so assuming there’s no major geopolitical news flow turning around for the class d active over the weekend, I think there is a high possibility that crude could enter a gradual cooling mode or a correction mode, so I think 120-124 remains a huge band of resistance for Brent crude levels. I think if we don’t go above those levels again, there’s a good chance we’ll be back towards 110 or maybe even 105 levels for Brent in the next one or two weeks.
What are your best bets for the coming week? You were very optimistic about the banking space. Would you like to dare some interesting names for us in the financial sector?
The focus is on financials I expect a rally on many individual names two buy calls the first I suggest is SBI Cards now we don’t often talk about the stock but the charts at short term for SBI Cards indicate that the stock is on the cusp of a decent breakout for itself, so it’s both daily and weekly crossovers that have happened for SBI Cards and I think there is a strong early indication that the stock could be moving back into a strong momentum zone for itself so would suggest a buy at 900 as an immediate target so short-term traders can consider a 40-45 bp upside from the highs current levels. The stop loss could be maintained in the 835 to 840 area.
The second would be a purchase on
a very interesting chart because at a time when Bank Nifty is still struggling below its 200 day moving average, Bank of Baroda is perched at a break point above its 50 day moving average and it is already comfortably at the above its 200-DMA. There is a higher degree of outperformance already seen in the stock price, an inverted head-shoulder pattern as well as well spotted on the daily charts, which would suggest a buy on Bank of Baroda expecting breakout targets of 116 stop loss 104.