How would you read into Fridays move on the index? Does the fact that we fell in line with global cues worry you because the market is bloated and elevated at these levels?
I believe that it is going to be difficult to cross 11,500 mark and that is going to be one of the key hurdles which is going to test the mettle of this bull market. There are a couple of data points which transpired on Friday and also the entire last week. For a good part of the week, the market breadth remained on the positive side except for Friday.
There was one important factor which gave the markets a bit of a concern and that was the rise of the dollar index. For the first time in last 12 months, we saw the dollar index rising above 96 mark.
Also, if you look at the terms of the composition of stocks which were going up, a large part of the private sector banking names like HDFC Bank, IndusInd Bank etc, were the ones which are now consolidating. L&T is still below its 200-day moving average and that is a big concern for the overall market structure as well. The 11500 call on the Nifty has the highest amount of open interest and even in the last week of rise, that open interest did not recede.
In fact, it just about increased on the higher side. All in all, you could be in for a bit if volatility, maybe a bit of retracement on the indices. 11,500 is the major resistance and on the support side, 11,200 is the point where we could try and test the support over the next couple of days.
What do you think is next in store for ICICI Bank which has had a stellar move and SBI after that bit of volatility on Friday, once the street was trying to digest the numbers and then that huge rebound that played out as well?
SBI ran slightly ahead of the results. Expectations were on the positive side and the stock had run up 15-16% in the last one and a half weeks odd of price performance. Post the results, we saw SBI correcting and in that process, formed a bearish engulfing kind of a pattern. I believe that over the next ouple of days at least, from a very near term view, the stock can retrace back to that Rs 300 mark. If it settles around this 200-day moving average which is around Rs 300 mark, the selling pressure could abate.
As regards for ICICI Bank, the stock should consolidate for at least a week or two odd around this Rs 330 odd mark. The run-up has been very sharp and swift and the indicators have entered into the overbought territory. I believe ICICI Bank should consolidate in the near term.
How would you read into the rebound in Eicher Motors which played out on Friday? Is it going to continue or is it just a flash in the pan?
This could be a false rebound. On monthly charts, it has given a breakdown of a nine-year range in terms of couple of indicators. Rarely I have seen that the stock gives you a false breakout of a nine-year kind of range and such kind of breakdowns on the indicators result into the stock going to a multi- month, multi-quarter downtrend.
I believe that could be largely the pattern for Eicher Motors. These kind of rallies in terms of trading opportunities should be used for shorting cases and at 29,000-29,250 there are ample amount of resistances. I categorically believe that another 200-400 points rally on the stock and it should come back into a good shorting opportunity.
What can we trade on Monday morning?
Again it is a mixed kind of trading ideas which I am giving. The first one is a buy on M&M. It is an interesting chart not just because of the kind of breakouts the stock has seen but over the last six months as well, it has been one of the few stocks which has not shown any kind of volatility and that is I think a positive aspect.
If you expect the index to become volatile, M&M could continue to ride higher from that angle as well. It is a buy and Rs 980 is a one week target and stop loss is closer to Rs 920-925 zone.
And the second one would be a sell on Tata Motors. I believe that on daily charts the stock has once again broken a crucial support of 250 mark, it has shown signs of weakness trading below its long term as well as 50 DMA and I believe it could continue to drag lower so that is also a sell, targets of at least 235, stop loss 260.