Jay Purohit of Centrum Broking, talks about his take on smallcaps and midcaps, where the Nifty is technically placed, and stocks that could make money for their investors.
Despite a lot of volatility in the market last week, it managed to finish in the green. The Nifty ended above 10,700, which was crucial according to a lot of market participants.
However, Jay Purohit, Technical and Derivatives Analyst at Centrum Broking, believes that for momentum to really pick up, the Nifty should cross 10,820.
In an interaction with Moneycontrol’s Kshitij Anand, Purohit said that if the index crosses that level, it could move towards 11,000.
Edited excerpts…
Q: What do the weekly and monthly charts tell you about where Nifty is placed technically?
A: The week started with a gap-up opening on Monday, but bears soon took that as a shorting opportunity and dragged the Nifty lower by around 150 points from its opening price.
The sharp fall of Monday was followed by a negative price action on Tuesday. However, the Nifty saw a sharp recovery in the latter half of the week. In last three trading sessions, we witnessed the good amount of put writing in Nifty options and market breadth too remained in favour of the bulls at the same time.
Eventually, the roller-coaster week ended with the gain of one-third of a percent over its previous close. The Nifty formed a ‘Dragonfly Doji’ candle on the weekly time scale.
Since the mentioned candlestick pattern got formed in the sideways direction, we won’t give much weightage to it. However,the the index has given a breakout from the ‘Symmetrical Triangle’ pattern on the daily chart and managed to close above the same from the last two sessions, which is a positive sign for the index.
But, it won’t be a cakewalk for the bulls as the banking index is still moving in-between the ‘Bearish Engulfing’ candle formed on Monday. For a sustainable rally, the BankNifty has to support the benchmark indices.
Also, the ‘RSI’ oscillator on the daily chart of Nifty is hovering around strong resistance level. It has to move above 60 – 62 level for a further rally in the index. For the momentum to pick-up, Nifty has to cross 10,820 level.
In that case, we may see a continuation in the ongoing rally towards 10,950-11,000 levels. On the flipside, the strong base has been formed in the zone of 10,550-10,620.
Q: A lot of stocks hit new 52-week lows this week. Do you think investors could consider buying them or should they stay away from them?
A: We witnessed a huge carnage in many mid-cap, small-cap and few large-cap stocks in the last couple of months. Though many stocks are trading near its ’52 week lows’, this is not an ideal market for bottom fishing.
We need to be very selective in stock picking; wait for the strong reversal signal before initiating fresh long positions in beaten down counter. Like we witnessed a strong reversal in pharma counters on Friday.
From the last few months, we are witnessing stock specific moves in the market and thus traders are advised to adopt stock specific approach with proper risk management.
Q: What is your call on smallcap and midcap stocks?Â
A: The Nifty Midcap50 index has given a false breakdown and formed a ‘Pin Bar’ pattern on the weekly chart. At the same time, Nifty Smallcap index too formed a ‘Hammer’ candlestick pattern on the weekly time scale.
Both the patterns are short-term reversal pattern which indicates a possibility of some bounce in coming days. Thus, traders are advised to hold long positions for a coming couple of weeks and in fact look for buying opportunities in quality names.
Q: Can you give us 3 positional calls that could return handsomely over the next 1 month?
A:Â UBL: Buy| Target: Rs 1,350| Stop loss: Rs 1,170| Return 9.7 percent
The stock closed above its multiple highs on the daily chart. The up move was supported by a good amount of long build-up. Thus, traders are advised to buy the stock for the target of Rs 1,325 – 1,350 in the coming weeks. The stop-loss for the trade should be kept below Rs 1,170.
Tata Elxsi: Buy| Target: Rs 1,370| Stop loss: Rs 1,190| Return 11 percentÂ
The stock is moving in a strong uptrend and is currently consolidating in the range of Rs 1,120 – 1,360 from the last seven weeks. The sideways movement has resulted in the formation of ‘Bullish Flag’ pattern on the daily time scale, whose breakout level is placed at Rs 1,360.
Considering the formation of long positions in futures from last two sessions, we are anticipating breakout in the counter.
Thus, long positions can be taken at current juncture with the stop-loss below Rs 1,190. On the upside, we may see Rs 1,340 – 1,370 levels in the coming days.
Ajanta Pharma: Buy| Target: Rs 1,100| Stop loss: Rs 950| Return 12 percent
The stock is moving in a strong downtrend and has seen a huge correction in the recent past. But, the counter has started rebounding from the Potential Reversal Zone (PRZ) of a Bullish Harmonic Pattern called ‘Bullish Butterfly’.
Also, the ‘RSI’ oscillator is showing positive divergence on both daily as well as a weekly chart, which is a positive sign for the stock.
Last week, the stock formed a ‘Hammer’ candle on the weekly chart, which can be a short-term reversal trigger in the counter. Considering above technical evidence, we are expecting a pull-back move towards Rs 1,080 – 1,100 in the stock. Thus, any dip towards Rs 950 would be a buying opportunity with a stop-loss below Rs 915.
