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. Nifty closed at 18513 with a gain of 205 points on a weekly basis. On the weekly chart the index has formed a Bullish candle which has totally engulfed its previous week’s move forming a “Bullish Engulfing” candlestick formation indicating a positive trend. The chart pattern suggests that if Nifty crosses and sustains above 18600 level it would witness buying which would lead the index towards 18800-19000 levels.
However, if the index breaks below 18300 level, it would witness selling which would take the index towards 18100-17900. For the week, we expect Nifty to trade in the range of 19000-17900 with mixed bias. The weekly strength indicator RSI is above its respective reference lines indicating positive bias.
Bank Nifty Outlook
Bank Nifty started last week with a downward gap and buying momentum led it close on a positive note. Bank Nifty closed at 42984 with a gain of 547 points on a weekly basis. On the weekly chart, the index has formed a small Bullish candle forming a higher High-low compared to previous week and has closed above previous week’s high indicating positive bias.
The chart pattern suggests that if Bank Nifty crosses and sustains above 43200 level, it would witness buying which would lead the index towards 43500-43700 levels. However, if the index breaks below 42700 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 daily and weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias.
Sector and Stocks to look at this week
We expect Banking, Metal, Automobile, Infrastructure sectors to show strength in the coming days, One can focus on stocks like State Bank of India (SBI), Canara Bank, ICICI Bank, HDFC Bank, Escorts, Ashok Leyland, Amararaj Battery, L&T, Cummins India, DLF, Ultratech Cement may show strength in coming days.
Nifty Strategy for the week
This week, traders can initiate a Moderately Bullish strategy with reduced premium outflow & lower breakeven point called BULL CALL SPREAD of 1st December expiry wherein traders can buy one lot of 18,500 call strike at 110 and simultaneously sell one lot of 18,750 call strike at 18, so that net outflow or maximum loss will be restricted to up to Rs 4,600. Nifty on expiry, if closes above the breakeven point of 18,592, the strategy will start making profits. The maximum gains will be restricted up to Rs 7,900; because the gains of long 18,500 strike call will be offset by the sold 18,750 strike call if Nifty closes above 18,750 on expiry.
(Rajesh Palviya, Vice President – Research ( Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.))