September F&O Expiry: Nifty could expire between 17,800-18,000 levels: Aditya Agarwala of YES SECURITIES
Stepping into the October series, bulls should be cautious as benchmark Indices are trading at overbought levels and a possible negative divergence is also developing between RSI and price on the daily time frame which indicates that the uptrend may lose momentum soon, Aditya Agarwala, Senior Technical Analyst, YES SECURITIES – said in an interview with Zeebiz’s Kshitij Anand
Stepping into the October series, bulls should be cautious as benchmark Indices are trading at overbought levels and a possible negative divergence is also developing between RSI and price on the daily time frame which indicates that the uptrend may lose momentum soon, Aditya Agarwala, Senior Technical Analyst, YES SECURITIES – said in an interview with Zeebiz’s Kshitij Anand. Edited excerpts:
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Q) A historic week for Indian markets as Sensex breached 60,000 on the upside while the Nifty50 inched closer towards 18000. What led to the price action despite hawkish Fed and Evergrande worries?
A) Indian markets climbed the wall of worry despite concerns surrounding the debt-strapped China property developer Evergrande as Bulls pulled the Nifty50 index higher from its key support area of 17,300 taking it beyond the 17,800 levels making a new all-time high, inching closer to the 18K mark.
Further, several states have relaxed Covid-19 restrictions allowing a pickup in the economic activity as 46 per cent of the Indian population is partially vaccinated while 16 per cent is fully vaccinated and reports of higher occupancy in hotels and flights confirm that both leisure and business travels have resumed leading to the buoyancy in the Indian equity markets.
Q) What is your view on markets – any immediate targets for Sensex & Nifty?
A) Indian benchmark Indices have outpaced its peers in the recent weeks posting a gain of 4.21 per cent for the month of September so far.
Further, the higher high and higher low trend can continue in the coming week as Nifty50 is on course to hit the 18K mark.
However, traders should be cautious from hereon as technical indicator RSI is approaching overbought levels on higher time frame charts and a possible negative divergence is also developing on the daily time frame (i.e. price made a new high while RSI made a lower high).
Moreover, Indian VIX has closed beyond the 16 levels and a move towards 18 can trigger bouts of sharp profit booking.
Q) Realty sector topped the charts in the week gone by. What is fuelling the rally and are there any top stocks that investors can look at?
A) The kind of move that we are witnessing in the realty sector was on the cards and doesn’t come as a surprise because the Nifty Realty Index had broken out of a 10-Year long consolidation phase.
Following a 21 per cent gain for the week gone by and 30 per cent for this month so far, the index is now approaching 540-600 levels which could act as a minor hurdle and RSI is also approaching overbought levels.
Traders who are making decent gains in this space can look to book partial profits closer to 540-600 levels on the Index. Stock that still offers a good risk-to-reward ratio from the current levels are Prestige Estates, Phoenix Mills Ltd, and DLF.
Q) As we approach the expiry week what are your expectations from the October series?
A) Open Interest build-up on the Call and Put side suggests that the Nifty could expire between 17,800-18,000 levels.
However, stepping into the October month bulls should be cautious as benchmark Indices are trading at overbought levels and a possible negative divergence is also developing between RSI and price on the daily time frame which indicates that the uptrend may lose momentum soon.
Failure to sustained beyond 18,080 levels may trigger sharp profit booking in the month of October.
Q) What should be investors' strategy as Sensex trades around 60,000 and Nifty50 at 18000? Time to be cautious or ride the momentum?
A) Traders should be cautious as the Nifty50 index approached the 18000 mark, it is not the time to ride the momentum blindly rather it is time to ride the trend from here on cautiously as the index looks stretched on charts with RSI above the 80 mark on the weekly time frame.
Also, India VIX is inching higher making an attempt towards 18 which could result in higher volatility and sharp corrections.
Q) The momentum remains strong – where should investors put money as Sensex trade at 60K and Nifty50 at 18000? Please suggest 2-3 stocks either based on technicals or fundamentals?
A) Here is a list of top trading ideas -
MCX: Buy | LTP: Rs 1654| Target: Rs 1750 | Stop Loss: Rs 1600 | Upside 6%
The stock has broken out from a narrow consolidation phase triggering the resumption of the bull trend.
Further, prices are moving higher up on good volumes. Technical indicator, Relative Strength Index (RSI) has turned upwards after taking support at the 50 levels suggesting strength in the stock.
Tata Chemicals: Buy | LTP: Rs 885.20 | Target: Rs 950 | Stop Loss: Rs 845 | Upside 7%
The stock has broken out from a flag pattern hitting new highs confirming bullishness. Further, Technical indicator RSI is also favouring an extended uptrend.
Eicher Motors: Buy| LTP: Rs 2928| Target: Rs 3100| Stop Loss: Rs 2810| Upside 6%
The stock has resumed uptrend after a retest of the neckline of an Ascending Triangle pattern in the recent throwback. Technical indicator RSI has turned upwards after taking support at the 60-level suggesting strength in the stock.
(Disclaimer: The views/suggestions/advices expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)
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