Chartist Talks | Bears may get more strength if Nifty breaks 22,200 support, says Sudeep Shah of SBI Securities

With the technical indicators showing some weakness, the Nifty may slide into a phase of consolidation, Sudeep Shah, head of technical and derivative research at SBI Securities, says in an interview to Moneycontrol.

He feels any sustainable move below the level of 22,200 may extend the phase period of booking profits up to the level of 21,950-21,900 for the short-term.

On the oil prices, the market expert, seasoned for more than 15 years in technical and derivatives research, says as long as Brent crude futures are trading above the level of $87 a barrel, it is likely to extend its current upward rally up to $93-96 a barrel.

Here's how the interaction progressed:

What is your technical view on the oil prices, especially after the Iran-Israel conflict?

Despite Brent crude oil concluding the week (ended April 12) with a decrease of 0.96 percent, it is still sustaining at higher levels closer to $88-90 a barrel on account of rising geopolitical issues.

Currently, it is trading above its short and long-term moving averages. These averages are in rising trajectory, and they are in the desired sequence, which suggests that the underlying trend is strong.

The daily RSI (relative strength index) is in bullish zone as per RSI (relative strength index) range shift rules. The daily and weekly MACD (moving average convergence divergence) stays bullish as it is quoting above its zero line and signal line.

Going forward, the zone of $87.50-87 will act as that of crucial support for Brent oil. As long as it is trading above the level of $87, it is likely to extend its current upward rally up to $93-96 a barrel, which is negative for an oil import-dependent economy like India.

Do you think the Nifty 50 is done with the rally, given the Shooting Star kind of pattern formation at the top on the weekly charts or it is a temporary profit-booking?

Technically, the Nifty is trading in rising channel since the last couple of months. During the previous week, it has touched the upper trendline of rising channel and thereafter has seen profit-booking from higher levels. This resulted into the formation of Shooting Star candlestick pattern on weekly scale. This pattern is often seen as a signal of a potential bearish reversal, especially when it appears at the peak of an uptrend.

With the technical indicators displaying weakness, the Nifty may slide into the period of consolidation and we advise investors to prioritise large-cap and quality mid-cap stocks for the coming few weeks as they offer a better risk-reward proposition along with a higher degree of safety in the run-up to the general elections.

Talking about levels, the zone of 22,200-22,300 will act as a crucial support for the index as it is the 50 percent Fibonacci retracement level of its prior upward rally (21,710-22,775). Any sustainable move below the level of 22,200 may lead to extension of profit-booking up to the level of 21,950-21,900 in the short-term. While on the upside, the zone of 22,700-22,750 will be the crucial hurdle for the index.

Even in case of Bank Nifty, do you expect profit-booking in the coming weeks before getting into another leg of rally?

Bank Nifty has been displaying remarkable strength compared to the Nifty index in recent trading sessions. The ratio chart of Bank Nifty against Nifty 50 reveals a bullish Pennant pattern breakout on Friday, signalling a potential continuation of this outperformance in the near future.

Tracking technical indicators, Bank Nifty is trading above both its short and long-term moving averages, which are on an upward trajectory. Additionally, the daily RSI is seated firmly in the bullish zone.

Hence, we believe, the zone of 47,900-47,800 will be the crucial support for the index as 38.2 percent Fibonacci retracement level of its prior upward rally (45,829-49,057) is placed in that region and till it holds, Bank Nifty is anticipated to maintain its outperformance over Nifty index and potentially reach levels around 49,100 followed by 49,500 in short-term.

Is it looking like a Double Top kind of scenario in the Nifty Smallcap 100 index?

Technically, the index is in strong uptrend as it is trading above its short and long-term moving averages. The momentum indicators and oscillators are also suggesting strong bullish momentum. Hence, the possibility of a double top scenario seems highly unlikely. It's important to note that the pattern tends to have a high failure rate, especially when observed within a context of a strong uptrend.

The 16,100-16,200 zone will be crucial for the index and till the 16,100 zone holds, the index is likely to edge higher towards 16,850-17,000.

Do you see the strong upward trend in the Nifty IT soon? And this time record high can't be ruled out?

No. Technically, Nifty IT is in bearish trend as it is trading below its 20, 50 and 100-day EMA level. Momentum indicators and oscillators align with this bearish outlook, reinforcing the negative chart structure. Notably, the ratio chart of Nifty IT compared to Nifty 500 has plummeted to a 49-month low, signifying pronounced underperformance relative to the broader market.

Talking about levels, although there can be intermediate rebound from short-covering in lower levels, the 50-day EMA placed at 36,046 will remain as a crucial hurdle for the index.

On the downside, any sustainable move below the level of 34,600 will lead to fresh round of selling in index. Above the level of 36,046 will lead to pullback rally in index up to 36,500/36,800 in short-term.

What is your trading strategy for TCS, especially after the quarterly earnings?

While Nifty IT is sustaining below its 100 DMA (daily moving average), TCS has been sustaining above its 100 DMA indicating better relative strength as compared to other IT Stocks. After the results which stayed ahead of expectations, we expect TCS to hold support levels at Rs 3,850-3,880 and gradually inch up to Rs 4,150-4,180 in the coming few months.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.