Chartist Talk: Nifty may break above 23,600 next week; SBI Securities’ Sudeep Shah picks 2 smallcaps

According to fresh market updates, Momentum indicators are showing early signs of improvement, but the Nifty 50 needs to decisively cross and sustain above 23,500-23,600 before confirming a elevated-side breakout, stated Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities, in an interview with Moneycontrol.

Until then, the index is likely to stay range-bound, with the 23,000-23,600 zone continuing to dictate the near-term trend.

Sudeep Shah bets on Electronics Mart India and Lumax Auto Technologies for the week ahead. "The indicators' alignment and price action suggest that Electronics Mart India is poised to break out and move elevated in the short term, while the momentum indicators and oscillators suggest that Lumax Auto might be poised for a breakout and move elevated.

Do you expect the Nifty 50 to break out of the 23,100–23,600 range on the elevated side the week ahead?

While Nifty has witnessed a mild pullback from softer marks, a decisive upside breakout above the 23,600 mark may still require further confirmation. The index has closed softer for the sixth consecutive week, although the slide was limited to just 0.22 percent, indicating that selling pressure has eased compared to previous weeks. On the weekly chart, Nifty formed a bearish candle with a long softer shadow, reflecting buying interest emerging near key backing marks.

From a technical standpoint, the index keeps trade below its key short- and long-term moving averages, which are still trending softer and suggest that the broader trend stays weak. That stated, momentum indicators have shown signs of improvement. The daily RSI has rebounded from oversold territory and registered a bullish crossover, indicating that the intensity of the correction has moderated and a short-term recovery phase could continue.

Going ahead, the 23,050-23,000 zone stays a crucial backing area, as it coincides with the previous swing low and the 61.8 percent Fibonacci retracement of the preceding uptrend. Holding above this backing will be critical for sustaining the ongoing pullback. On the upside, the 23,450-23,500 zone, which aligns with the 10-day EMA, is likely to act as an immediate hurdle. A sustained move above 23,500 could strengthen bullish sentiment and gain the probability of a breakout above the 23,600 range ceiling, opening the door for a move towards 23,700 and thereafter 23,900.

In summary, while momentum indicators are showing early signs of improvement, Nifty needs to decisively cross and sustain above 23,500-23,600 before confirming a elevated-side breakout. Until then, the index is likely to stay range-bound, with the 23,000-23,600 zone continuing to dictate the near-term trend.

Which two stocks would you like to buy the week ahead?

EMIL has been consolidating in a Rs 197-168 range for the last 4 weeks. The stock broke out of the consolidation but marginally closed below the upper end of the range, which was well supported by healthy volumes. Despite the consolidation, the stock trades above key moving averages on both the daily and the weekly timeframes. The rising ADX on the weekly chart suggests bullish trend resilience.

The DI lines have started to widen in the ADX indicator with DI+ placed above DI- in the ADX indicator, indicating firm control of bulls over the bears. The MACD line is on the verge of crossing over the signal line, indicating renewed bullish momentum.

The indicators' alignment and price action suggest that the stock is poised to break out and move elevated in the short term. Hence, accumulation is recommended in the zone of Rs 194-198 with a stop-loss of Rs 188. On the upside, it is likely to test the level of Rs 210 in the short term.

Lumax Auto Technologies has been consolidating in a Rs 2,149-1,894 range since August 11. The 34-day EMA acted as a dynamic backing for the stock recently, reflecting firm underlying price action structure. The 34-day EMA zone additionally coincided with the prior resistance zone, which now acted as a firm backing base for the stock.

The RSI, which was hovering and moving sideways, has turned elevated and settled above the 60 mark, indicating renewed bullish momentum. The ADX has started to climb gradually on the weekly timeframe, indicating bullish trend resilience. The momentum indicators and oscillators suggest that the stock might be poised for a breakout and move elevated.

Hence, accumulation is recommended in the zone of Rs 2,085-2,110 with a stop-loss of Rs 2,025. On the upside, it is likely to test the level of Rs 2,255 in the short term.

Do you see the possibility of the surge continuing in Bharti Airtel the week ahead?

Bharti Airtel is showing a softer high–softer low formation on the daily chart. That stated, the stock formed a sizeable bullish candle and reclaimed key short-term moving averages, indicating a positive shift in near-term price action. The RSI has witnessed a sharp uptick, reflecting a buildup in bullish momentum.

The immediate backing for the stock is placed in the Rs 1,820–1,810 zone, and the pullback is likely to extend as long as the stock sustains above this backing zone.

Will UNO Minda shares be able to break out above the previous swing highs the week ahead?

UNO Minda has witnessed a firm pullback of nearly 11 percent over the last three sessions after taking backing around its 200-day EMA. The RSI has risen sharply from 31 to 60, indicating a significant improvement in bullish momentum.

Additionally, the DI+ has crossed above DI- on the ADX indicator, signalling a shift in control towards the bulls. The previous swing high is placed in the Rs 1,305–1,310 zone. Given the sharp improvement in the technical indicators, a decisive breakout above this zone could pave the way for further upside in the near term.

Why is the 57,500 level crucial for the Bank Nifty, where maximum Call and Put open interest is concentrated?

The 57,500 level has emerged as a crucial reference point for Bank Nifty, as it holds the highest concentration of both Call and Put open interest. Such a significant build-up on both sides generally indicates that traders at large view this strike as a fair value zone for the current expiry. As a result, the index often gravitates around this level unless a firm trigger leads to aggressive unwinding or fresh position creation.

The importance of 57,500 is further reinforced by the prevailing technical setup. Bank Nifty has remained range-bound over the last seven trading sessions, moving within a 1300-point band and ending softer for the fourth consecutive week. Although the weekly chart has formed a bearish candle, the presence of a long softer shadow suggests buying interest is emerging at softer marks.

From a trend perspective, the index keeps trade below its key moving averages, while the flattening of the 100-day and 200-day EMAs highlights a lack of firm directional bias. The daily RSI is additionally hovering in the neutral zone, indicating subdued momentum.

Going ahead, the 55,700-55,600 zone stays a key backing area, while 56,900-57,000 is likely to act as an immediate hurdle. A sustained move above the resistance zone could trigger short covering and pave the way for a move towards 57,500 and elevated. Conversely, any softness below backing may result in renewed selling pressure. Hence, 57,500 stays a key level to watch as it could dictate the next directional breakout in Bank Nifty.

Are the charts signalling that Ather Energy and APL Apollo Tubes could move back towards their record-high marks?

Ather Energy has been consolidating in a Rs 1,744–1,524 range since late August, indicating a period of digestion after a healthy up move. Despite the consolidation, the stock keeps trade above key moving averages, while the rising ADX indicates resilience in the underlying bullish trend.

APL Apollo has additionally been consolidating in a Rs 2,281–2,041 range since late August. This consolidation follows a firm up move. The stock keeps trade above key moving averages, while the RSI has reclaimed the 60 mark on the daily chart, indicating improving bullish momentum.

For both stocks, a decisive breakout above the upper end of their respective ranges could pave the way for further upside, with the potential to move towards their respective record-high marks.

Do you expect further upside in the Nifty Midcap 100 and Smallcap 100 indices?

The outlook for both the Nifty Midcap 100 and Nifty Smallcap 100 stays cautiously positive despite the recent volatility. Both indices saw sharp swings during the week but attracted firm buying interest at softer marks, suggesting market participants keep use corrections as accumulation opportunities.

The Nifty Midcap 100 has shown early signs of stabilization after three consecutive weeks of slide. Importantly, the index reclaimed its 100-day and 200-day EMAs after briefly slipping below them, while the RSI recovered from weaker marks, signaling improved momentum. A decisive move above 63,100-63,200 could trigger further upside towards 64,200 and 64,700.

The Nifty Smallcap 100 keeps demonstrate relative resilience, forming a long softer shadow on the weekly chart and holding above its key moving averages. This suggests firm demand at softer marks. A breakout above the 20,000-20,050 resistance zone can pave the way for a move towards 20,300 and 20,500.

Overall, both indices are showing resilience, and a breakout above their respective resistance zones could lead to further upside in the near term.