Nifty could see short covering on direct rise above 24,433: Anand James

Economic Times

2 days ago

Nifty experienced a sixth consecutive negative weekly fall, but a potential pullback is anticipated early in the week due to recovery signals after lower Bollinger Band penetrations. While broader markets struggle, PSU Banks show mixed signals with potential support from key stocks like SBI. MAHLOG and CMSINFO are top picks, indicating reversal attempts with bullish patterns and oversold conditions.
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Since the turn lower from June, all penetrations of lower bollinger band were followed by a recovery candle on the next day, which boosts the hope for a pullback move early in the week, says Anand James , Chief Market Strategist, Geojit Investments Limited Edited excerpts from a chat:Since the turn lower from June, all penetrations of lower bollinger band were followed by a recovery candle on the next day. This boosts the hope for a pull back move early in the week, as last Friday saw a close below the lower bollinger band. That said, the 200 day SMA, now positioned at 24049 is clearly pulling Nifty, with 23722 offering fibo support below. Alternatively, direct rise above 24433 could spark short covering After a fortnight of selling, the Nifty PSU Bank index witnessed a pullback this week from a horizontal support zone that has held since June. However, the last trading day of the week formed a doji candle, casting a doubt on the reversal's strength. On the weekly chart, the technical setup has not turned bullish yet, with the MACD still vulnerable to a bearish signal crossover. From a derivatives perspective, 85% of F&O stocks saw short additions on Friday. However, on a weekly basis, 71% of these stocks still hold long positions, indicating mixed sentiment. From a stock-specific angle, SBIN, PNB, Union Bank, and Indian Bank—which together constitute around 63% of the index—have shown early signs of a reversal. Notably, SBI formed a pinbar doji on Friday, adding weight to a reversal narrative. We see the Nifty PSU Bank index opening on a weak note next week, but support for reversal attempts may be expected from SBI, PNB, Union Bank, and Indian Bank.While 46% of Nifty 50 constituents had a positive weekly close, only about 30% of Nifty 500 stocks did the same. So, yes, broader marker struggling when compared to the benchmark index, with small caps leading the declines, as only 24% of the small cap index had a positive weekly close. This shows that the traders are largely risk averse. This is also reflected in the number of stocks closing below pervious week's lows. While 55% of small cap indices did so, only 36% of Nifty 50 constituents did so. As Nifty 50 approaches it 200 day SMA, 46% of its constituents are already below this key MA, while 58% of the small cap constituents have already sunk before their respective 200 day SMA. This is not an extreme yet, which suggests some more pain before a reversal is seen.Give us your top picks for the week.MAHLOG (CMP: 322)View: BuyTarget: 348SL: 299The stock has been declining since July and now appears to be attempting a pullback. On Thursday, it formed a bullish engulfing candle, followed by another green candle, indicating a potential reversal. Additionally, the MACD histogram is showing signs of exhaustion at lower levels, and a hammer candle on the weekly chart adds further weight to the reversal narrative. We expect the stock to move towards 348 in the near term. All long positions should be protected with a stop-loss placed below the 299 level.CMSINFO (CMP: 444)View: BuyTarget: 475SL: 430The stock has been in a pullback phase since July and now appears to be attempting a reversal. It formed a bullish engulfing candle pattern on Thursday, signaling early signs of a potential turnaround. Additionally, the 14-day RSI is below 30, indicating an oversold condition, while the MACD histogram is showing signs of exhaustion at lower levels, both supporting the reversal attempt. We expect the stock to move towards 475 in the near term. All long positions should be protected with a stop-loss placed below the 430 level.