“On Friday, the slide’s sharpness got softer by the third hour, whose close was bested by last hour’s close. This is suggestive of a recovery, which will face the first challenge at 24350,” he says. Edited excerpts from a chat:
With the Nifty consistently being on a downward trend, is sell on rise the best strategy now? What are the key levels to watch out for?
Clearly, a sell on rise approach has been visible so far, since the descent from September peak, during which there was hardly any period which witnessed higher highs. Such has been the bearish momentum during this period and all eyes are now on the 200-day SMA at 23372, which is about 3% from current levels. That it is taking time to head to the 200-day SMA despite 100 and 50 SMAs being broken a while ago points to the sharpness of the rise in the last 6 months. The distance between 100 and 200 SMAs is the highest since the sharp ascent during the 2020-21 period.
We are now at a perfect point to correct this anomaly as we approach August low of 23893, providing a breathing space for bulls to regroup, arrest declines and possibly affect a sideways move at least. On Friday, the slide’s sharpness got softer by the third hour, whose close was bested by last hour’s close. This is suggestive of a recovery, which will face the first challenge at 24350.How would you go about trading both Nifty and Nifty Bank for the monthly expiry?
Rollovers have picked up, but do not seem to be large enough to suggest a hurry or an extension in the ongoing downtrend. They are at 19.25 and 23.57 for Nifty and Nifty Bank respectively, well in line with the last four month’s average. Nifty and Bank Nifty straddles are also priced in line with last expiry levels of similar periods, at 330 and 740 respectively, pointing to the absence of any exaggerated range expectations, especially given how far below Nifty’s 200 day SMA is. Volatility as indicated by VIX is only near 14, again pointing to the absence of peak fear. None of this, though, is an indication towards reversal, but is suggestive of a calmer expiry. Among stock futures, while 76% saw long liquidation, 16% saw short covering, when compared to Thursday, pointing to some green shoots towards buying interest. Echoing this sentiment, FIIs, DIIs as well as clients were seen reducing shorts in index futures while boosting longs. The sharpest increase in longs were from FIIs, who boosted their long positions in index futures by 5% on Friday.
Give us your Muhurat day trading strategy.
We would go into the Muhurat session with a positive bias. In the last 10 years, Nifty ended positively on 8 out of 10 Muhurat trading sessions. Apart from that, 80% of the time in the last 10 years, Nifty saw the next two months to be positive. FIIs have remained net sellers during 5 out of the last 10 Octobers and they were net buyers in November during 7 out of the last 10 Novembers which would add to the positive expectation for the next two months. That said, caution still rules, raising the virtues of astute stock picking.
PSU stocks were among the worst hit in the week. What are the charts indicating at – more downside or chances of bottom-fishing?
PSE index’s monthly chart is indicating more weakness with minor support near 9900 and the breach of which could push the index down towards 8700. The number of stocks in Nifty PSE index trading below 200 DMA rose to 65% from 40% last week. The monthly RSI is coming off the overbought region. In the daily timeframe, the index has broken below the downward sloping channel support. Even though extreme short term momentum indicators are moving into the oversold region which could bring in some relief in the near term, we expect such moves towards 10250 to face resistance.
KPIT Tech ended the week down 23% after Q2 results failed to impress and led to target price cuts. Is it worth buying the dip now?
Since August 2020, KPIT Tech has closed below its 50 WMA for just two times, but on this occasion it has closed 13% away from the key average. Last time (June 2022), KPIT Tech bounced back above the 50 WMA in the very next week. In March 2024, the momentum indicator RSI (14 day) stayed in the oversold region for just three days and we saw a strong bounce back thereafter. This time also, the RSI has moved into the oversold region, but the distance it now has from the 200 DMA, now at 1608, points to extension in the ongoing downtrend. We pin our hopes on the horizontal support of 1330 or the 100 WMA of 1282, to arrest declines, and attract bargain buying. Else, expect 1000 61.8 fibo of the 2022-2024 low-high.
Which stocks are going to be on your watchlist in the Diwali week.
PRSMJOHNSN (CMP:191)
Target – 205 – 220
Stoploss – 174
After the correction since September, the stock has seen an inside bar candle on the weekly charts and it has been consolidating this week hinting at an attempt to reverse in the near term. RSI has crossed above its 14 day moving average in the daily time frame favoring our expectation of a pull back. We expect the stock to move towards 205 and thereafter towards 220 in the next few weeks. All longs may be protected with stoploss placed below 174 levels.
DMART(CMP:4052)
Target – 4200 – 4450
Stoploss – 3845
The stock has been declining since the last couple of the weeks and seems to have taken support around the rising trendline support of 3970 forming an inverted hammer in the weekly time frame hinting at reversal. Also, the MACD histogram has shown early signs of exhaustion at lower levels in the weekly scale and the Stochastic Momentum indicator histogram in the weekly time frame too has formed an exhaustion pattern supporting our reversal argument. We expect the stock to move towards 4200 and 4450 in the next few weeks. All longs may be protected with stoploss placed below 3845 levels.
