Edited excerpts from a chat:
Nifty’s breach below 200-DMA in the last week of February accelerated the decline as missiles in the Middle East are empowering bears. What are the key support and resistance levels to watch out for in this scenario?
Having closed under the 200-day SMA for five successive days, the ongoing slide appears to be gaining momentum for an extended slide to 23535. This being the default scenario, let us also weigh the reversal possibilities. While Friday had opened with upside hopes having formed a morning star upside reversal candlestick pattern on Thursday, the close below Thursday’s low diffused such hopes. However, the close was not deep enough to invalidate the upswing possibilities signalled by a stochastic momentum oscillator. Additionally, we have now had four days of consistent trades near or below two standard deviations from the 20-day mean, pointing to the possibilities of a mean reversion move. This encourages us to look for upswings, as long as surprise drops do not stretch beyond 24074, which is where the downside marker may be placed.
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 pullback. Is the current downtrend increasing hopes of a sharp pullback rally now?
While the Nifty IT index has indeed ended in the red for a seventh straight week, history shows that such extended declines have sometimes preceded sharp near‑term rebounds. Apart from the April-May 2022 stretch of eight consecutive down weeks, which was followed by a swift pullback, a similar pattern occurred in July 2008, when a seven‑week decline also triggered a strong rebound averaging 3-5% in the following week. Currently, the index remains in a short‑term corrective phase, having broken below a long‑held rising support trendline and now stabilising near the 30000 zone. The decline has been steep and volume‑heavy, but smaller real bodies in recent candles hint at cooling downside momentum.
Key support lies at 29500-30000, where a defended base could spark a relief bounce toward 31200-31700. From the derivatives perspective, sentiment appears mixed, with about 33% of near OTM put strikes witnessing short or long buildup, and nearly 50% of stock futures showing long additions or short covering indicating traders are divided on next week’s trajectory. Moreover, several index majors like Infosys, Wipro, HCLTech, Persistent have formed weekly reversal setups, supporting a short‑term bullish bias. Overall, while caution remains warranted, the current structure does increase the odds of a pullback rally if support holds.
Mazagon Dock was among the top gainers in the week. What does the chart look like for the week ahead?
MACD registered a signal line crossover on Friday, while also posting a histogram above centre line, the first such event since late January. This is a positive set up. However, RSI is yet to break its recent peak, and the swing from two lower to upper bollinger band took just two days, pointing to the abruptness of the up move. Not surprisingly, this move also failed to breach January’s peaks, and the subsequent close back inside the bollinger band pointed to potential exhaustion in bullishness, especially having traded below VWAP all through Friday. We would however be encouraged to look at the stock on dips to 2420, with downside markers placed below 2350. Alternatively, a direct rise above 2360 could give us the confidence to play a 2800 move.
PSU bank index was among the worst hit during the week. Do you think we could now see some buying coming in again?
Nifty PSU Bank Index has entered a short‑term cooling phase after an extended rally, with the weekly chart forming an Evening Star pattern, a traditionally bearish reversal signal indicating fatigue at higher levels. This pattern suggests the recent up‑move may be losing momentum. On the daily chart, however, prices have slipped toward a horizontal support zone near 9150-9200, where the index previously consolidated, increasing the possibility of a brief oversold pullback in the very short term. Volumes during the latest decline remain moderate, indicating the absence of aggressive long unwinding. If the support zone holds, the index could attempt a bounce toward 9350-9450, though the broader tone remains cautious due to the weekly reversal pattern. A sustained move below 9100 would weaken the structure further and expose the index to deeper retracements toward 8800. Overall, short‑term sentiment is neutral to mildly negative, with a near‑term rebound possible but the weekly setup advising caution on fresh longs until the index reclaims upward momentum.
Give us your top ideas of the week.
POLYMED (CMP: 1356)
View: Buy
Target: 1485
SL: 1320
Poly Medicure has shown early signs of stabilisation after a prolonged decline, with the weekly chart displaying a strong rebound candle from oversold zones. Price has reclaimed the 1330-1350 band, which acted as minor support earlier, and improving volumes indicate emerging buying interest. The daily momentum setup also hints at a short‑term recovery, with RSI turning up from oversold levels and MACD showing early signs of flattening. As long as the stock holds above the 1320 level, the pullback setup remains valid. A move above the recent swing region near 1400 could strengthen momentum further and open the way toward the upside target of 1485. Overall, the short‑term outlook is cautiously positive, supported by improving price behaviour and early momentum confirmation, while 1320 remains the key reference level to keep the bullish structure intact.
CHALET (CMP: 764)
View: Buy
Target: 790
SL: 740
Chalet Hotels is attempting to stabilise after a steady multi‑week decline, with the daily chart showing prices holding near a horizontal support zone around 755-765. Momentum indicators reflect an oversold setup with RSI hovering near lower bands and trying to flatten, while the MACD histogram shows early signs of slowing downside momentum. A minor bullish divergence is also beginning to build, suggesting the stock may attempt a short‑term rebound if the support zone holds. Any move above 775 could strengthen near‑term sentiment and open room for a push toward the immediate upside target of 790. However, the recovery structure remains vulnerable unless price firmly stays above the 740 level.
