Geojit’ Investments Anand James recommends caution following recent market volatility. While a technical bounce is possible, he notes that the Nifty requires a break above 24,140 to confirm further recovery. While IT stocks are oversold and the overall bias remains cautious, James recommends a selective approach, prioritizing technical confirmation before taking further action in the coming week.
Edited excerpts from a discussion:
The sharp decline of the previous 3 sessions clearly upset the bulls who thought the market had perhaps made peace with war. How have your calculations changed over the last 3 days?
Having come close to the March peak a few days earlier, the uptrend had almost reached its end, but we had hopes of extending it for most of last week. However, Friday’s lower open dismantled the bullish structure, opening up room for 23,500. That said, after tracing 68% of the April 13 rise to the month’s high, an upside mean reversion is likely, which could renew the upside outlook targeting 25,000-25,600. However, given the many resistances that will appear soon, we would need confirmation of a breakout beyond 24140. Otherwise, the disadvantages could persist.
The IT index is suddenly the worst performer again with a weekly loss of 10% amid weaker than expected forecasts given by software exporters. Will the bear game get stronger?
The Nifty IT index saw a sharp decline, becoming the worst performer this week, but the current setup also hints at the possibility of a near-term rebound. Technically, the index broke the daily supertrend and witnessed a bearish MACD crossover, with the average component RSI hovering around 40, reflecting weak conditions but not oversold. The weekly bearish Marubozu indicates strong selling pressure; however, prices are trading close to last month’s support of 28,288. The derived data adds an interesting layer with approximately 67% of near-OTM call option strikes saw an addition of short positions, while almost 80% of stock futures saw a long run on Friday and on a weekly basis, giving way to further short selling or a pullback. Additionally, with approximately 44% of stock options showing a PCR OI below 0.5, the likelihood of a near-term pullback or rebound has increased, although the broader bias remains conservative. However, a sharp break below 28,288 could open the door to the next major support around 26,300, maintaining the broader bias negative.
HCL technology was among the worst losers last week. What should traders do this week?
HCL Technologies reflects acute sector weakness and stock-specific pressures. The trend remains decidedly weak, with prices well below key averages and momentum indicators firmly bearish. The daily RSI has fallen below 25, indicating deep oversold conditions, increasing the likelihood of a near-term technical pullback or relief bounce. Such a move could extend towards the 1280-1300 zone, which now acts as an immediate resistance zone. However, this rebound, if it materializes, will probably have a corrective effect rather than a change in trend. The broader structure continues to show lower highs and lower lows, and momentum remains negative. Traders should therefore take a cautious approach, using any pullback towards resistance to alleviate long exposure or look for selling opportunities on the upside, while maintaining the overall negative bias over the coming week.
RI stocks would be in focus Monday morning. Given that the stock is down this year, what do the charts indicate for the week ahead?
Two successive days of closing below the 10-day SMA portend weakness ahead. That said, the rally seen last Friday encourages us to harbor upside hopes, but the 1345-50 region would need to be broken convincingly to refute the overall negative view.
Pharmaceutical stocks suddenly become a strong defensive play. How do you see the dynamics of stocks like Piramal Pharma and DRL in the future?
Yes, but this theme also has its limits. Oscillators for these two stocks suggest overbought conditions. As both of these prices remain stagnant near February highs, it would be prudent to wait for pullbacks to re-emerge.
Share your best trading ideas for the week ahead.
LPE (PCM: 226)
See: Buy
Target: 338
SL: 219
LPE showed the first signs of stabilization after the recent rise, forming an inside bar doji on the daily chart, which reflects temporary indecision after a slippage. Momentum remains constructive, with the RSI holding around 55, indicating underlying strength and no immediate loss of momentum. Importantly, the stock is trading above the monthly downtrend line, suggesting a potential shift from a corrective to a consolidation phase. As long as the EPL holds above 220, the bias remains positive with the possibility of continued movement on a decisive breakout above the bar’s inner range. However, traders should watch for confirmation through volume expansion. A break below recent support would negate the setup, but for now the technical structure favors a cautiously positive near-term outlook.
A SINGLE SOURCE (PCM: 1824)
See: Buy
Target: 2030
SL: 1680
A SINGLE SOURCE shows a clear improvement in its technical structure, which suggests positive prospects for the future. The stock decisively crossed its long-term downtrend line, signaling a potential shift in the broader trend. On the weekly time frame, the EPL also exceeded the 1690 supertrend level, indicating a transition from bearish to bullish territory. Adding to the strength, the stock broke above its 200 DMA at 1678 this week. Momentum indicators are favorable, reinforcing the bullish bias. As long as the EPL holds above these breakout levels, the setup favors continued upside, with any near-term consolidation likely to be healthy.
