As the 20,000 mark remains elusive, how significant is the resistance at the 19,800-mark for Nifty?
Despite breaking through the 19620 region that had previously hindered several downward attempts, the upward swing towards close on Friday is very encouraging, as it bounced off the 20-day SMA. This setup is further supported by a positive divergence and a dragonfly formation, suggesting that Monday should have the potential to reclaim 19700, followed by an attempt to break through the key 19770-840 region, which has been a challenging area to overcome since early this month.
What should be the trading strategy in the new August series given that FIIs have reduced their long positions in the July series?
Although four consecutive months of uptrend raise concerns about exhaustion, the significance of FIIs’ reduced long positions compared to the 30-day average is diminishing as activity in index options is much higher. The August series has performed well in the past two years, but this year is different as we enter the series with VIX near record lows. Despite volatility throughout the month and several indications of a collapse on Friday, VIX barely rose from its near record levels, encouraging traders to be more risk-on. This setup should bode well for the August series to make another attempt at reaching the 20000 mark. The earnings season prompts a stock-specific approach rather than an index-specific one.
After the 5% decline in shares of ITC this week, what is the technical outlook going forward? Do you anticipate a bounce back?
The chances of a bounce back are clouded by the fact that we do not expect the record peak to be reclaimed quickly. Going into next week, our upside expectations are limited to 487, but there is a higher likelihood of falls if 451 is broken.
Nifty Pharma rallied over 4% last week due to strong Q1 earnings. How do you interpret this upside and which stocks appear strong on the charts? The gains in Nifty pharma were driven by Cipla and Dr. Reddy’s, which together contribute around 17% to the index. Both companies reported strong Q1 numbers, with Cipla gaining the most as they provided better visibility on their launches in North America and their overseas revenue remaining highest. Dr. Reddy’s saw an 18% increase in PAT supported by overall performance in the US and Russian generics, boosting the stock price.
Sunpharma has experienced a wedge breakout and a MACD signal break in the monthly time frame, indicating a strong medium-term outlook for the stock with the potential to reach 1229-1300 levels. Among others, Sunpharma, Divislab, Drreddy, Cipla, Alkem lab, and Ipcalab appear strong on the charts.
Give us your top 3-4 ideas for this week?
1) FDC (CMP: 345)
View: Buy
Entry range: 346 – 340
Target: 355 – 364
Stoploss: 332
The pullback from March lows has been strong, and after a minor dip seen in early July, the stock is back at the horizontal resistance level of 345. With MACD breaking above the signal line in the daily time frame, we expect the stock to break out soon and move towards 355 and 364 levels in the next few weeks. All long positions should be protected with a stop loss placed below 332.
2) JKTYRE (CMP: 263)
View: Buy
Entry range: 263 – 258
Target: 270 – 280
Stoploss: 252
The stock has been trading within a wedge pattern on daily charts and has recently broken out of the pattern. Additionally, MACD forest has shown exhaustion at lower levels, indicating a pullback. We expect the stock to move towards 270 and 280 in the next couple of weeks. Long positions may be protected with a stop loss placed below 252.