There is currently no clear indication from the technical charts regarding the movement of the stock market, but signs of strength are emerging in selected sectors and stocks. This is what Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, has to say. He believes that the 20-day EMA is sloping downwards, while the 50-day and 100-day EMAs are almost flat. This setup shows a lack of strong direction in the market. Momentum indicators also confirm this uncertainty.
However, according to Sudeep Shah, the current price structure supports the possibility of a significant breakout in Nifty IT in the near term. In this background, he has a positive stance on selected stocks of IT and banking space for the next week.
Top picks for next week-
1. HCL Technologies
Sudeep Shah says HCL Tech has given a breakout of the downward-sloping trendline on the daily chart, indicating a possible trend reversal. The stock found strong support near the confluence of the 50-day and 200-day EMA on January 5 and since then the prices have moved higher respectively. The RSI is trending upward, while the cross of DI+ over DI- on the ADX points to strengthening bullish strength.
Moreover, the ratio-line of Nifty IT/Nifty ratio has also broken the previous high, indicating potential outperformance. Based on this setup Sudip Shah recommends buying in the range of ₹1,700–1,690, with a stop-loss at ₹1,630. The stock may test the level of ₹1,850 in the short term.
2. Punjab National Bank (PNB)
PNB has given a breakout of horizontal trendline resistance on the daily chart and it comes with good volume support. The zone of ₹127.5-128.5 was earlier a strong supply area, which the stock has decisively crossed. The special thing is that the stock has closed above the upper Bollinger Band for two consecutive sessions, which is often considered a sign of strong buying in the early stages of the trend.
ADX is moving up, which shows bullish trend strength. Also, the sharp rise in Nifty PSU Bank/Nifty ratio shows relative outperformance in the PSU banking space. Sudeep Shah calls for a buy in the range of ₹133–132, stop-loss at ₹127, and short-term target at ₹145.
Sudeep Shah is bullish on these 3 stocks also
Sudeep Shah says that his bullish view on AU Small Finance Bank, Federal Bank and Bank of India remains intact. This is underpinned by both sectoral and stock-specific technical strength. Both private banks and PSU banks are outperforming their benchmarks as indicated by fresh breakouts and rising ratio-lines on their ratio charts (against Nifty).
Bank of India in particular has seen an increase in volumes with a horizontal trendline breakout on the daily chart. The stock is trading above key moving averages, while the MACD remains above both the signal line and zero line, confirming positive momentum. Price action and indicator setup show scope for further upmove to continue.
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