Day trading guide: Bank Nifty has more room on the upside

Amit Trivedi, YES Securities

Rallying ~8 per cent in just six sessions, Nifty made a fresh all-time high at 12,474, surpassing Jan 2020 month’s peak of 12,431. Banking and financials were major contributors in the recent rally. Nifty in the previous week gained ~5 per cent. However, out of the Nifty50, only 14 stocks managed to beat the benchmark returns. It represents that selected stocks are leading from the front and others are gradually gaining traction. Appearance of another upward gapping action ensures an immediate floor near 11,200-11,250 zone.

Meanwhile, Bank Nifty retraced 66.66 per cent (i.e. 2/3) of the entire decline from record high. Post six days of rally, mild consolidation might be there. Nevertheless, Bank Nifty has more room on the upside. Hence, stock specific rally could continue.

India VIX index dropped in the recent past from 25 to levels of 20. Significant open interest additions are seen at ATM and OTM put strikes, while 11,500 call strike holds maximum base for this week's expiry. It suggests that traders are expecting Nifty to consolidate at the upper band.

Future recommendation
Buy Power Grid November future near Rs 181-182

• Stop loss: Rs 177.50
• Target: Rs 190
• The stock has regained momentum on the upside post few days of consolidation. Appearance of bullish candle along with rising open interest and sustenance above short-term averages indicates positive outlook for the stock.

Option recommendation
Buy HPCL (Hindustan Petroleum Corporation) 210 strike November call option near 5.5

• Stop loss: 2.5
• Target: 12
• The stock swiftly rebounded from Rs 180 levels and during the process, it surpassed the hurdle zone near Rs 200. Shifting base higher, Rs 200 strike put holds maximum open interest base; while positive follow up action above Rs 210 could lift the stock further higher till Rs 222-225 zone.

Equity recommendation
Buy Emami Ltd near Rs 375-378

• Stop loss: Rs 356
• Target: Rs 420
• Multi-week decline eventually found renewed buying interest near levels of the 50-day EMA. These EMA levels are intact on a closing basis from June 2020. It also helped to keep the overall set-up positive. Positive follow-up above Rs 380 could mean resumption of uptrend.

(Amit Trivedi is CMT, Technical Analyst - Institutional Equities, YES Securities)