Kunal Bothra: I believe that the index is broadly consolidating. Post three weeks of a strong rally the indices are going through a bit of grind. A lot of signals have been mixed in the last week. On one hand, you saw a recovery in the US markets, especially Dow in the second half of the previous week. But our markets went through a phase of correction.
Look at the internals of the markets, Nifty IT index is showing signs of strength, but predominately stronger ones like cement, etc, are the stocks which saw a correction in the second half of the week. So the signals are getting a bit mixed for the index. But when you look at Nifty levels, we have not broken any key supports on the short-term charts. So first and foremost support, I believe Nifty is closer to the 11,700-11,750 zone. We tested that level on Friday but saw a good recovery on intraday basis.
The candle-stick pattern for Nifty on Friday closing basis is also positive. It is a bullish hammer pattern. So a lot of positives are coming across for the index. The good part about the markets going forward is that for every 101-150 points lower on the index you have strong support. There is gap support and price space support for the index. So, the market should now go into a bit of a short-term grind and short-term consolidation. But if these supports hold on, then there could be a chance that you might see a push back to new highs yet again for the indices.
ET Now: Indiabulls Real Estate saw a nice uptick on Friday. However, it gave up all of those gains and ended the trading session in the red with deep cuts. What do you make of the movements seen over there? Also, IB Housing too saw a lot of volatility in Thursday’s trading session as NBFCs cracked, and then on Friday as the rebound was followed by some more selling action. What do you make of these movements?
Kunal Bothra: IB Housing and IB Real Estate in terms of short term, as well as medium-term chart patterns, are in complete contrast because the setup for Indiabulls Real Estate is becoming very positive. Since the stock bottomed out closer to Rs 75-80, the volume texture has changed, and prices are moving into a stable uptrend. It has even crossed the long-term averages quite easily with high volume push. Indicators are extremely supportive for the stock price. Friday’s selling was maybe the case where you look at the build-up in terms of volumes on the anticipation of the news, and when the news comes out you see some profit booking.
So, the candle-stick pattern on Friday is also slightly negative, but that should probably have an effect just for the next three to five trading sessions. The stock might come back to support at the Rs 115-120 zone. There it should see one more level of buying. Stock comes back to say support zone which is at Rs 115-120 zone, where it should see one more level of buying.
For Indiabulls Housing, the chart patterns are a bit different, because every round of rally which you have seen for the stock has been met by a very strong force of selling pressure. The stock is now trying to break its key support. I think Rs 730 is the next support for Indiabulls Housing. If it manages to break and close below this, especially on a weekly closing, it could indicate that the stock would go for an 8 per cent to 10 per cent correction further below those levels.
ET Now: Based on the charts and stock movements, what looks interesting in terms of executable trade ideas for the following week?
Kunal Bothra: I will highlight two stocks from the non-F&O space. One of them is Rites. Now the stock was recently listed. It has a limited price history but a look at the last three weeks of price patterns. It has recovered quite remarkably from sub-200 levels to almost 280-275 odd levels. And now, it is showing some strong breakout on the short-term charts. The previous swing high for Rites was just about that 280 level. So I believe the stock should be in strong momentum and could give a breakout even from current levels. I would recommend a positional buy with Rs 300 as target and stop loss at Rs 273. Second would be a buy on Chambal Fert. That stock has seen a remarkable recovery in the last three weeks, almost a V-shaped recovery. A rally of 40-45 per cent from sub-200-day moving average levels to now at multi-week, multi-month high levels. On a positional basis, I would recommend a target of Rs 205-206 and stop loss to be kept at Rs 185.