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As far as the market setup is concerned, 15,700 is what we have managed to maintain. Is the risk reward favorable for the next week up or down?
Now setup for indices indicates consolidation at 15700 mark. It took a long time for the market to break below that 15700-15750 support area over the last three months, when a support is breached it changes its behavior and then it becomes resistance. If we look at this week there were two attempts towards the 15700 mark; about one to three trading sessions back, from there nifty There was a blow to the lower back and then there was a second attempt that ended on Friday.
The more consolidation it is the better because with every fresh attempt towards a breakout of the 15700 mark it could be a permanent breakout.
The good thing about the market so far is that new sectors are emerging so we are not dependent on the banking index or bank nifty to try and move forward.
Money is rising in auto stocks and there has been some good short covering as well as buying in auto indices and many other sectors. So market breadth is improving significantly but I believe it will take some more time for us to break past above 15700 especially on the index front.
If one is looking for a rebound trade will metals be a pick as it was observed that metals were one of the worst performing counters. But going forward and keeping the expiry in mind, would you like to visit any of these metal counters for a rebound?
I believe the answer will probably lie in how the next trend on the indices is shaped. Assuming that if we cross the 15700 mark and if we do so in a few trading sessions and assuming that the index jumps significantly higher then there could be a strong period of short covering.
Metals, IT and even cement stocks are also the highest positions where we have seen formation of higher open interest on the short side.
If there is any case of recovery in the indices then there could be more short covering in the line and going with the close of the next week, the shorts will also not want to rollover the position at the next expiry. So there’s going to be a frantic cover up that might have happened in this space. So I think the answer is probably in some way or the other how trends are shaped around the world and possibly across indices. So even if one buys the metal stocks maybe a few percentage points higher than the current levels, I think it’s still not a bad bet because then it would be more of a confirmation trade rather than an anticipation trade.
What is your view on Dollar Index as it remains above the 100 mark and near the breakout zone of 105? Going forward do you expect a breakout on that front or do you believe it is somewhat over for now?
I think the dollar index is reaching a stage where the momentum is slowing down significantly. Now in the last one month there have been two tests for the dollar index at this 105 point.
One was in the first half of May where the dollar index was back at 104-105 points. Then it retested the lower level and came back again to break that 105 mark.
In both of those attempts, the relative strength index has actually made a lower high for itself, meaning that even if the dollar index is trending higher or slowing, that’s clearly the first sign that it’s going to lose momentum. Probably one will see imminent return in this index as well.
To put it just in perspective, the same thing happened for crude oil when about a month ago crude was trading at $120-125.
Even when crude oil was going up, the pace was slowing down and then suddenly within a month and a half, crude oil came back to 110.
I feel something similar to the size for the dollar index, certainly given the extent of the dominance of the factors of the dollar index this can be increased as many global currencies like yen etc are still depreciating or falling.
So the dollar index may take more time but eventually the index should cool down from the current levels. It is possible that in the next one to two months we may see the dollar index trading at least 3-4 points below current levels. So close to 100-101 is where the next range for the dollar index could emerge.
The other leading indicator for the market has been crude as it has been very sticky in the barrel market around $110. Do you expect it to be around that level, is it a very strong support level?
It is not a strong support, but it is becoming a base for crude oil. Brent In the last two to three months, crude oil prices have reached from $110 to $125 a barrel.
There was an exceptional case in the month of February when crude jumped to 140, but when you look at it largely as a range of 125-110, crude was in the range.
It is now back at the lower end of the range and with this recent high crude had made 125 odd points, there was a lesser acceleration of momentum in crude oil prices, so it was a very important indicator.
Even as the charts are still showing the SPDR Energy ETF has seen a very significant unwinding and is clearly a sign or early indication that the trend has reversed for crude.
I think it should be a matter of time when crude oil prices come down below the $100 mark. If you look at Brent crude futures in the next three months, six months ending 2022 and early 2023 they are actually trading below sub 100 levels.
So it may calm down more slowly for crude oil prices, but if it is triggered by some sort of event on Russia-Ukraine then I believe the downside for crude oil prices is somewhere. Could be stronger but is on a downward trajectory.
The PSU Bank Index has performed relatively well in comparison to Bank Nifty in the past week. Going forward will you be a buyer in any of those PSU bank space because the AGM happened and after that we saw a good move on that counter and even with twins this week Bajaj The twins supported the markets. What kind of move do you expect in the name of PSU?
Looking at the breakout structure of the PSU Banking Index and internals, we can see that it is not the large cap PSU names that have performed very well, but it is the midcap names such as Central Bank Of India Who has done really well this week.
So yes, PSU Banking stocks have outperformed the benchmark Bank Nifty, but then we will need a sustenance of large cap names to move the banking index higher.
So if large caps start participating, there may be an added degree of confidence in the market, but although PSUs are one of the banking names in stocks, which I think are more attractive than risk-reward purchases, a lot. not a short term kind of business but i think
On the chart I find 150-153 very attractive.
It is back towards a multiple support base so I guess if I were to start trading from the PSU banking pack it would be Indian Bank at current levels and look for a positional target of type 165-170.
What do you see interesting for the coming week? I am curious to know if you have any auto names on your list because you are rally riding when it comes to M&Ms. So any auto name is also moving forward?
Yes, in fact, M&Ms is one of my top picks for next week as well. Even though the stock closed at a new lifetime high breakout level, I still believe the stock has momentum as compared to other auto names.
So I want to ride the trend on M&M at current levels as well. Rs 1120 could be the next possible target for the stock in near future and stop loss for this trade could be placed at Rs 1030.
The next stock I am bullish on is from the financial space which is
, Its a very interesting setup as the stock has shown a clear RSI Divergence setup on the hourly time frame and this generally indicates that there should be at least 4-5% uptrend in the very near term.
I would suggest buying on LIC Housing also and target should be placed at Rs 312 with stop loss at Rs 335.
One of the other stocks I have been bullish on in the past month is
, The stock is trading near that 640-650. It has been trading consistently above its 50-day moving average for the past one month and I believe with the improving market structure, the recently listed stocks have many of these midcap names looking to breakout. Can see, especially Paytm. Hence I would suggest to buy the stock with Rs 700 as target and stop loss can be placed at Rs 630.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)
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