By Rajesh Palviya
Nifty started the week on a negative note but witnessed buying at lower levels to end the week on a positive note as well as close above all-time high. Nifty closed at 18696 with a gain of 183 points on a weekly basis. On the weekly chart the index has formed a long bullish candle forming higher High-low compared to previous week and has closed above the previous week’s high indicating positive bias.
The chart pattern suggests that if Nifty crosses and sustains above 18900 level, it would witness buying which would lead the index towards 19100-19300 levels. However, if the index breaks below 18500 level, it would witness selling which would take the index towards 18300-18100. For the week, we expect Nifty to trade in the range of 19300-18100 with positive bias. The weekly strength indicator RSI is above its respective reference lines indicating positive bias.
Bank Nifty Outlook
Bank Nifty started the week on a negative note and remained in a narrow range throughout the week, indicating lack of strength on either side. Bank Nifty closed at 43104 with a gain of 120 points on a weekly basis. On the weekly chart, the index has formed a small bullish candle with upper shadow indicating resistance at higher. levels. The chart pattern suggests that if Bank Nifty crosses and sustains above 43300 level, it would witness buying which would lead the index towards 43500-43700 levels.
However, if the index breaks below 42800 level, it would witness selling which would take the index towards 42500-42300 . For the week, we expect Bank Nifty to trade in the range of 43700-42300 with mixed bias. The weekly strength indicator RSI is above its respective reference lines indicating positive bias.
Sectors and stocks to watch this week
We expect sectors like Banking, Cement, Metal, Midcap IT, Real Estate, Sugar, and Chemical to witness bullish bias this week. One can focus on stocks like Kotak Bank, HDFC Bank, State Bank of India (SBI), Bank of Baroda, Ultratech Cement, Ambuja Cement, Tata Steel, Jindal Steel & Power, L&T Technology Services (LTTS), Coforge, DLF, Oberoi Realty, Balrampur Chini Mills, Deepak Nitrite, Reliance Industries this week.
This week, traders can initiate a Moderately Bullish strategy with reduced premium outflow & lower breakeven point called BULL CALL SPREAD of 8 December Expiry wherein traders can buy one lot of 18,700 call strike at Rs 116 and simultaneously sell one lot of 18,900 call strike Rs 40, so that net outflow or maximum loss will be restricted to up to Rs 3,800. Nifty on expiry if closes above the breakeven point of 18,776, the strategy will start making profits. The maximum gains will be restricted up to Rs 6,200 because the gains of a long 18,700 strike call will be offset by the sold 18,900 strike call if Nifty closes above 18,900 on expiry.
(Rajesh Palviya, Vice President – Research ( Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)