By Anand James
Momentum missing
VIX has retracted to 15 and below, after teasing 19. While this suggests that the market has come to peace with the present uncertainty and expects lesser volatility, the repeated swings in VIX will put stocks and options traders on the back foot. Momentum is lacking, but we are at the vicinity of critical levels in key indices suggesting that large directional moves are in store next week.
Nifty and Bank Nifty evenly poised
Both have shown triangular consolidation at the bottom, seen as early signs of reversal, but both are still yet to turn positive, as evidenced by the lack of follow-through momentum on Friday despite a peak above 24400 on the Nifty. This was surprising but could be attributed to the near 400-point gapped-up opening on the Nifty, leaving little buying interest to fuel further upsides on the last working day of the week. It is fair to say that the trend is evenly poised. Nifty needs a push above the 20-day SMA now at 24420, to aim for 24540 initially and embark on a 25800 trajectory. The downside marker is now at 23975, which is where both the Bollinger band extremity and 50-day SMA have converged. An attack on this region will expose the low 23000s, but prospects of the same appear low, given low momentum. Bank Nifty meanwhile, appears more prepared to make the upmove first, with a push above 50700 making room for short covering rallies to 51300. Downside marker may be placed at 50300.
Sectoral Cues
Nifty Auto Index has seen a weekly MACD signal break and opened a bearish Marubozu candle in the monthly time frame painting a weak picture. The average 14-month RSI of the heavyweight stocks is above 75 which could trigger profit booking in Auto stocks especially Tatamotors, M&M, Bajaj-auto, Eichermotor, Tvsmotor and Heromotoco, which together forms around 52% of Auto Index, and push the index down towards 21836.
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Nifty Realty Index has formed a candle pattern similar to Evening Star in the monthly time frame. Strong support for the index is seen close to the 970 and 850 levels. Apart from DLF, Brigade, and Sobha, the majority of the Realty stocks have either formed an Evening star or a similar bearish candle pattern in the weekly and monthly time frames. Lodha, Godrejprop, Oberoirlty, Phoenix, and Prestige could see some dips before forming a base. If at all there is a pullback, DLF, Brigade, and Sobha could lead.
On the pharma index, we have been maintaining a positive stance on the Nifty Pharma index since it broke out of the consolidation hurdle in June. We prefer to stick with the same view, with the next resistance for the index seen near 24000. Expect Sunpharma, Cipla, Zyduslife, Torntpharm, Mankind, Lupin, and Auropharma, which form around 62% of the index, to lead.
(Disclaimer: Anand James is the Chief Market Strategist at Geojit Financial Services. Views, recommendations, opinions expressed are personal and do not reflect the official position or policy of Financial Express Online. Readers are advised to consult qualified financial advisors before making any investment decisions. Reproducing this content without permission is prohibited.)