Edited excerpts from the conversation:
Nifty’s breach below the 200-DMA in the last week of February accelerated the decline as tensions in the Middle East fueled the rout. What are the key support and resistance levels to watch out for in this scenario?
With five consecutive days closing below the 200-day SMA, the ongoing slide seems to be gaining momentum for an extended slide to 23535. While Friday opened with bullish hopes on Thursday morning stars forming a bullish reverse pattern, Thursday’s low nearly dashed those hopes. However, the band was not deep enough to invalidate the upside potential indicated by the Stochastic Momentum Oscillator. Additionally, we now have four consecutive days of trades near or below two standard deviations from the 20-day mean, indicating the potential for a mean-reverting move. This encourages us to look for upside, until the surprise drop is above 24074, which is where the downside could be signaled.
The Nifty IT index ended in the red for the 7th consecutive week on Friday. Back in April-May 2022, we saw 8 such negative weeks before a sharp rebound. Does the current downtrend now raise hopes for a sharp rebound?
While the Nifty IT index actually ended in the red for the seventh straight week, history shows that such extended declines are sometimes preceded by near-term recoveries. Apart from the eight consecutive down weeks of April-May 2022, which were followed by a sharp rebound, the same pattern occurred in July 2008, when a seven-week decline also led to a strong rebound of 3-5% on average the following week. Currently, the index remains in a temporary correction phase, has broken below the long-term support trend and is now stable near the 30000 zone. The decline is very tight and voluminous, but small main bodies in the last candle indicate a cooling movement.
Key support is at 29500-30000, where a defended base can provide a relief bounce towards 31200-31700. From a derivatives perspective, sentiment appears mixed, with about 33% of near-OTM strikes witnessing short or long formations, and nearly 50% of stock futures showing long additions or short covering as traders split over the coming week. Additionally, many index majors like Infosys, Wipro, HCLTech, Persistent have established weekly reversal sequences, which support short-term bullish bias. Overall, while caution remains warranted, the current structure increases the likelihood of a reversal if support is found.
Mazgundak was among the top gainers in the week. What does the chart look like for next week?
The MACD recorded a signal line crossover on Friday, while also posting a histogram above the center line, the first such event since late January. This is a positive setting. However, the RSI has yet to break its recent highs, and it only took two days to move from the lower to upper Bollinger Bands, indicating the suddenness of the upward move. Not surprisingly, the move also failed to break the January highs, and the move back inside the Bollinger Bands indicated potential fatigue in the momentum, especially trading below the VWAP on Friday. However, we would encourage the stock to see a low of 2420, with a downside indicator below 2350. Alternatively, a straight rise above 2360 gives us confidence to move to 2800.
The PSU Bank index was the worst hit during the week. Do you think we could see some buying coming back now?
The Nifty PSU Bank Index has entered a temporary cooling phase after a long period, the weekly chart is forming an Evening Star pattern, traditionally a bearish reversal signal indicating exhaustion at higher levels. This pattern suggests that the recent upward movement may lose momentum. On the daily chart, however, prices have fallen towards the horizontal support zone near 9150-9200, where the indicator had previously consolidated, increasing the possibility of a short oversold pullback in the very short term. Volumes have remained moderate during the recent decline, indicating a lack of prolonged bearishness. If the support zone holds, the indicator could try to push towards 9350-9450, while the broader tone remains cautious due to the weekly reversal pattern. A sustained move below 9100 will further weaken the formation and expose the indicator to a deep pullback towards 8800. Overall, the short-term sentiment is neutral and slightly negative, with near-term reversals possible but the weekly setup advises caution on fresh lengths until the index recovers.
Give us your best ideas of the week.
Polyamide (CMP: 1356)
View: Taking
Target: 1485
SL: 1320
Polymedicare has shown early signs of stabilization after a long decline, with the weekly chart showing a strong rebound candle from oversold zones. The price regained the 1330-1350 band, which previously served as minor support, and improved volumes indicate emerging buying interest. The daily move setup also points to a short-term recovery, with the RSI rising above oversold levels and the MACD showing early signs of flattening. As long as the stock is above the 1320 level, the pullback setup is valid. A move above the last swing area near 1400 could further strengthen the move and pave the way for a target above 1485. Overall, the short-term outlook is cautiously positive, supported by improving price behavior and confirmation of a bullish move, while 1320 remains a key reference level to maintain an upside structure.
Chalet (CMP: 764)
View: Taking
Target: 790
SL: 740
Chalet hotels are trying to stabilize after several weeks of continuous decline, with the daily chart holding prices close to the horizontal support zone around 755-765. Momentum indicators reflect an oversold setup with the RSI stalling near the lower bands and attempting to flatten, while the MACD histogram is showing early signs of slowing momentum. A small sharp divergence is also starting to form, suggesting that the stock may attempt a short-term rebound if a support zone is found. Any move above 775 could strengthen the near-term sentiment and open room for a push towards the immediate above target of 790. However, the recovery formation remains vulnerable unless the price stays above the 740 level.
