“Our upside objective is in the region of Rs 500-550, but would be mindful of the chances of major collapse, should we not get above Rs 430. An aggressive stance would be to have Rs 390 as the downside marker,” he said. Edited excerpts from a chat:
Following new peaks made by Nifty this week, how cautious would you be in the next week ahead of the monthly F&O expiry? What are the key levels to watch out for?
Anand James: As we step into the last week of February series, rollovers have started to gain momentum in Energy, Metal and Chemical stocks, with 85% of F&O stocks appearing to witness long buildup since last expiry and 53% on a week on week basis. Meanwhile, 11% of F&O stocks saw Short buildup since last expiry and 42% on a week on week basis. Long addition was visible in Cement, Capital goods, Oil, Auto and Pharma stocks since beginning of this expiry.
Weekly data shows a different picture with 78% of IT and 59% of Financial services stocks witnessing Short buildup and 100% of Realty and Energy stocks witnessing Longs. In other words, we are entering the last week of the series a bit long, heavy, barring a few sectors, and this calls for caution.
Technical structure of Nifty is yet to paint a visible reversal sign as yet, but the multiple rejection trades that we have seen on approach to record peak, hints at exhaustion, and could potentially lead to sideways move. The directional indicator (+DI) has begun to soften, and we would be actively tracking more signals to go with the negative oscillator divergence seen in the weekly chart.
With these in the background, we prefer to keep our downside marker at 22055 on a closing basis, while continuing to have 22450-550 as the near term objectives. But we believe that large swings or muted sideways moves need to be accounted for in the coming week, rather than a directional play.
Do you see the trend of private banks racing ahead of their PSU counterparts sustaining in the days to come amid delivery-based buying in counters like HDFC Bank?
Anand James: Similar trend was visible in Axis Bank and Kotak Bank with average delivery% rising from 50% to 57% on week on week basis in the case of Axis bank and 47.5% to 62% in the last week in the case of Kotak bank. We do prefer private sector banks over PSU counterparts for the next week.Do you find cherry-picking opportunities in PSU bank stocks after the dip?
Anand James: PSU banks had a tough week, a scenario consistent with our view that they are to face a time correction, but not necessarily an outright fall. Profit booking was seen in Midcap segment which had recorded significant gains previously. The average 14D RSI of midcap PSU Banks have dipped from 80 plus region to sub 60 levels. Also, a few of them like Unionbank, Bank of India, IOB and Indian Bank have shown signs of reversal as well. It would be prudent to wait for a bit more dips as well as time in the case of largecap PSU banks like SBI, Canara Bank and Bank of Baroda as they haven’t seen a meaningful correction yet. In other words, it is too early to adopt a cherry picking approach.Yes Bank shares ended the week around 8% lower. What are the charts telling you? Do some technical analysis for us on how one should trade.
Anand James: Yes Bank appears to have come off the bullish technical structure that it has been on lately. While it eyes 22.6, the recent reaction low to pivot and regroup, we feel that momentum may not be in its favour at the moment. Weekly standard deviation studies put 13.8 as the downside extremity.
Paytm is turning out to be one of the top weekly gainers in the BSE500 pack. Given the volatile and extreme movements in the stock since the last 3 weeks, is it better to stay away?
Our stance is that there is indeed a trading play here, while the long term structures re-align and reshape. Our upside objective is in the region of 500-550, but would be mindful of the chances of major collapse, should we not get above 430. An aggressive stance would be to have 390 as the downside marker.
Give us your top trading ideas for the week.
BLUESTARCO (CMP: Rs 1293)
View : Buy
Targets : Rs 1,350 – 1,400
Stoploss : Rs 1.255
The stock has been on an upside since 2014 and have seen every dips being bought into. Last three months have been really good for the stock adding 40% to its price. The momentum remains strong and after a minor consolidation, the stock is on the verge of a horizontal resistance breakout. The stock trading above all its key moving averages. We expect the stock to move towards Rs 1,350 and Rs 1,400 in the near term. All longs may be protected with stoploss placed below 1255.
NAZARA (CMP: Rs 793)
View : Buy
Targets: Rs 840 – 865
Stoploss : Rs 760
The stock has been on a decline since the beginning of this year and is seen forming a base around the horizontal support zone of 773 near to which a doji candle is formed. MACD has shown signs of exhaustion at lower levels hinting at the possibility of a pull back in the near term. We expect the stock to move towards 840 and 865 in the near term. All longs may be protected with stoploss placed below 760 levels.
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