Despite Friday’s recovery attempt, technical charts are painting a cautious picture for in the coming week. Anand James, Chief Market Strategist at Geojit Investments Limited, believes the recent sell-off isn’t over yet and expects the index to test the 24,060 level before any meaningful recovery takes hold.
However, it’s not all doom and gloom. While broader markets face headwinds, James sees a major breakout brewing in , with the sector poised to surge toward 40,300 levels as an inverted Head & Shoulders pattern nears completion.
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In an exclusive chat with ETMarkets, the market veteran shares his reading of the current technical setup, explains why PSU banks may struggle despite rate cut expectations, and reveals his top stock picks for the week ahead.
Edited excerpts from a chat:
Following the sell-off seen in the last 2 days, what are the charts hinting at for the coming week? Do you fear more downside?
The lack of momentum early last week, along with longs continuing to constitute just 20% of FII’s index future positions, despite Nifty trading above a multi-week consolidation range, was enough signal that there was no enthusiasm in chasing prices higher. However, the steep drop having stretched almost to the lower range of the May-Jun trading band looks to have attracted buying interest. That we are also near 1 standard deviation from the 20-day SMA is also a supportive factor. Meanwhile, though VIX rose 7.6% on Friday, it is still not at a level that is threatening a collapse. With this in perspective, we will continue to nurture upswing hopes, but believe that they will be short-lived, we are more likely to head to 24060 at least, before broad-based strength returns. Note that SMIDs which have been at the forefront of the upswing in the last four weeks, have shown signs of plateauing.
How do you read the outperformance of IT stocks? Will the outperformance continue?
The ongoing pullback that began in April appears to be gaining momentum and is likely approaching the final phase of a breakout from an inverted Head & Shoulders pattern on the weekly chart. The index is currently trading near its 50-week exponential moving average (WEMA), which continues to provide dynamic support. From a derivative angle, 60% of the IT stocks saw long buildup on Friday, and 70% saw long addition on a week-on-week basis. A robust green candle on the weekly chart, coupled with strengthening MACD histogram bars, signals growing bullish momentum. This setup suggests further upside potential in the coming weeks. We anticipate the index to advance towards 40,080 and 40,300 levels, driven by strong performances from key constituents such as Infosys, HCL Technologies, Tech Mahindra, and Persistent Systems.
Nifty PSU Bank index broke 4-week winning streak to end over 2% lower. As PSU banks and NBFCs are said to be bigger beneficiaries of the rate cut and liquidity easing cycle, do you see chances of positive momentum returning?
After three consecutive sessions of decline, the Nifty PSU Bank Index staged a recovery on Friday, forming a strong bullish candle and closing above the 20-day moving average (DMA) at 6,918. This signals a potential short-term pullback toward the 7,000–7,025 range in the early part of next week. However, the weekly chart paints a more cautious picture. The formation of a bearish engulfing pattern, typically a reversal signal, combined with signs of momentum exhaustion in the SMIO histogram and 71% of the stocks witnessing Long unwinding from a derivative point of view on WoW basis, suggests that the rebound may be short-lived and could face resistance later in the week. From a broader perspective, as long as the index holds above the trendline support at 6,350, bulls may attempt to regroup around key support zones. The expected pullback is likely to be driven by strength in stocks such as State Bank of India, Bank of Baroda, Punjab National Bank, Union Bank of India, and Indian Bank.
Cochin Shipyard shares were one of the biggest losers in the week and ended around 10% lower. Any thoughts on this stock’s trajectory?
An evening star pattern spotted in the previous week had set off a week-long downtrend that has now found buying from the 20 day SMA, which is now near 2048. That the SMA also coincides with the 61% fibo retracement of the 21May-6Jun upmove is another reason for the buying interest. Yet, we believe that the ongoing recovery move may not turn lower again after a brief bounce, aiming for the low 1700s. Alternatively, direct rise above 2350-2400 region could keep the uptrend running for a longer period.
Give us your top ideas for the week.
ASHOKA (CMP: 206)
View – Buy
Target – 224
SL – 198
The stock has been under pressure for the past five sessions but appears to have found support near the 50% Fibonacci retracement level at 201 (May low and June high). From this level, a recovery attempt is underway. On Friday, the formation of a Doji candle suggests indecision among traders, often a precursor to a potential reversal. Additionally, hourly MACD indicators are showing signs of exhaustion, pointing to a likely short-term pullback in the coming week.