A short covering rally in Bank Nifty index hinges on the results of HDFC Bank, given its substantial 30% weightage, says Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities. “HDFC Bank faces an immediate hurdle at Rs 1680, where its 20-DMA is located. A decisive breakout above this level is crucial for accelerating momentum. On the downside, the stock has support at Rs 1600, and a close below this level could lead to additional selling pressure,” he said.
Edited excerpts from an interview:
We are entering the earnings-heavy week with Nifty being at record high levels. How cautious should F&O traders be at this point?
Nifty displayed notable strength on the technical chart, witnessing a fresh breakout after a subdued start to the January series. Despite challenges in the Bank Nifty index, the bullish view persists as long as it sustains above 47000. A key turning point is anticipated when the Bank Nifty surpasses the 48000 level, triggering significant short-covering rallies towards the 50000 mark.
Do you see signs of a stronger breakout in any of the IT stocks? Which ones look best avoided at this stage?
The IT sector, as a whole, appears to have bottomed out on the technical charts, with a significant breakthrough above the critical level of 36000. Particularly noteworthy is the Midcap IT space, signalling robust buying interest in the upcoming sessions. At present, none of the stocks in the sector seem to be indicating an avoidable situation, as the entire IT sector gains strong momentum.
Nifty Bank would be in focus this week as heavyweight HDFC Bank announces its quarterly numbers. How would you go about strategizing your trades?
The upcoming short covering rally in Bank Nifty index hinges on the results of HDFC Bank, given its substantial 30% weightage. HDFC Bank faces an immediate hurdle at 1680, where its 20-DMA is located. A decisive breakout above this level is crucial for accelerating momentum. On the downside, the stock has support at 1600, and a close below this level could lead to additional selling pressure.
Network 18 shares were the top gainer in the week. Do you see signs of the counter being at overbought levels? What are the targets?
Network18 has emerged as a significant outperformer this week, registering an impressive gain of 33.5%. The stock has experienced a strong breakout, and any retracement to the 116-112 range is considered an ideal buying opportunity. The potential upside targets for Network18 are set at 135/140.
Give us your top ideas for the week.
1) Buy Bank of India in the range of Rs 128-123. Stop loss Rs 115. Target price: Rs 145/150
Bank of India has exhibited a robust breakout on the daily chart, accompanied by a significant surge in volumes. The momentum indicator, RSI, has confirmed the bullish momentum with a positive crossover. The lower-end support is evident at 115, providing a cushion for the bulls. Anticipating further upward movement, the potential upside targets for Bank of India are set at 145 and 150.
2) Buy L&T in the range of Rs 3560-3530. Stop loss Rs 3450. Target price: Rs 3800-4000
Larsen & Toubro (L&T) is poised for a breakout from an upward consolidation range, consistently finding support at its 20DMA. The momentum indicator RSI has recently turned positive with a crossover, confirming the bullish momentum. A visible lower-end support at 3450 acts as a foundation for potential bullish movements. Considering these factors, the stock holds potential upside targets of 3800 and 4000.
3) Buy Sonata Software at Rs 750. Stop loss Rs 720. Target price Rs 800-820
Sonata Software is currently in a robust uptrend, showcasing higher highs and higher lows on the daily chart. The stock recently witnessed a breakout with increased volumes from its 20-day moving average, affirming the bullish momentum. The positive crossover in the momentum indicator RSI further confirms the buy signal. The lower-end support is identified at 720, providing a cushion for the bulls. With these indicators, the upside potential target for Sonata Software is set at 800.
