Nifty recovered from the day’s low and two session setback to trade with 160 points lead at 21,399.35 on Wednesday aided by recovery in bank, IT and FMCG stocks.
Commenting on the day’s set-up, Anand James, Chief Market Strategist at Geojit Financial Services said that a swing high is favoured given Nifty is at the lower extremity of the bollinger band. However, the path is littered with numerous obstacles and requires a close above 21,490 for confirmation or else one can expect the downside up to 20,900 to resume, James said. He sees 21,315 and 21,430 as obstacles on the way up.

We spoke to analysts on how one should trade stocks that were in focus in the previous trading sessions based on derivative and technical data:

Analyst: Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research, SBI Securities told this to ETMarkets

Bajaj Finance slips below 200-day EMA level

The stock of Bajaj Finance gave an upward-sloping trendline breakdown on Tuesday. The trendline was formed by connecting swing lows from November 2023. This breakdown was accompanied by substantial trading volume, emphasizing the bearish sentiment. The stock also formed a notable bearish candle on the breakdown day, reinforcing the negative outlook.

Further, along with this breakdown, the stock has tumbled below its 200-day EMA level, which is a bearish sign. This breakdown serves as a bearish signal, reflecting a potential shift in the stock’s long-term trend. Further, the 20 and 50-day EMA has started edging lower. While the rising slope of the 100 and 200-day EMA has slowed down significantly, which is a bearish sign. The momentum indicators and oscillators are also supporting the overall bearish chart structure. The daily RSI has slipped below 40 mark for the first time after November 2023. The daily MACD histogram is suggesting pickup in downside momentum.

The derivative data paints a clear picture of significant short accumulation, as evidenced by a 3.45 per cent decline in the January series future. In tandem, there has been a noteworthy 12.26 per cent upswing in the cumulative Open Interest (OI) across the current, next, and far series. This data collectively indicates a robust build-up of short positions in the stock.

There is a notable concentration of CALL open interest at the 7300 strike, followed by the 7400 strike. While significant open interest on the PUT side is observed at the 7000 strike. Talking about option chains, from 7250 to 6950 CE strikes have witnessed CALL writing. While, on the PUT side, from 7050 to 6500 strikes have either witnessed PUT buying or PUT short covering. This clearly indicates bearish momentum in stock.

Considering the aforementioned observations, we anticipate the stock to sustain its downward trajectory. Hence, we recommend initiating the sell position in the zone of 7150-7100 level with the stop loss of Rs 7400 level. On the downside, it is likely to test the level of Rs 6700 and subsequently Rs 6550 in the short to medium term.

IDFC First Bank gives trendline breakdown

The stock of IDFC First Bank formed a Long-Legged Doji candlestick pattern on September 05, 2023, and thereafter it witnessed correction of nearly 20% in just 38-trading sessions. However, it marked a low of 80.80 in November 2023 and thereafter slid into the period of consolidation. Notably, it has demonstrated weaker performance compared to leading market indices over the past few months. In December, the Mansfield Relative Strength indicator dipped below the zero line, indicating a persistent underperformance relative to the broader market.

On Tuesday, the stock gave a horizontal trendline breakdown on daily scale. This breakdown was supported by volume spurt. In addition, the stock has formed a sizable bearish candle. Currently, the stock is trading below 20, 50 and 100-day EMA level, which is a bearish sign. The leading indicator, 14-period daily RSI has tumbled below 40 mark. The daily MACD stays bearish as it is quoting below its zero line and signal line.

The derivative data strongly suggests a notable uptick in short positions, with the January series experiencing a decline of over 7%, accompanied by a nearly 2% surge in the cumulative Open Interest (OI) across the current, next, and far series.

There is a notable concentration of CALL open interest at the 85 strike, followed by 90 strike. While significant open interest on the PUT side is observed at the 80 strike. Talking about option chains, from 86 to 80 CE strikes have witnessed CALL writing. While, on the PUT side, from 81 to 77 strikes have either witnessed PUT buying or PUT short covering. This clearly indicates bearish momentum in stock.

Hence, we recommend selling the stock in the zone of 83.50-82.50 level with the stop loss of Rs 86.50. While, on the downside, it is likely to test the level of Rs 76, followed by Rs 72 in short-term.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)