ETMarkets Smart Talk: Short covering highly likely in post-Christmas week: Anand James

After the sharp correction seen last week, Anand James, Chief Market Strategist at Geojit Financial Services, says short covering is likely now as fear is at an extreme. Usually such situations see a rebound, he said in an interview with ETMarkets. Edited excerpts :

Given the 2.5% drop seen in Nifty last week, do you still have hopes of any Santa Rally in the last week of 2022?
There have been significant cuts across the board, especially in small and midcaps, affecting the risk appetite of retail traders. Usually, such an event takes a while to recoup. However, the losses have been unilateral, with 87% of F&O stocks witnessing long unwinding and 89% of NSE stocks witnessing at least 5% losses from the last week’s high. This signals that fear is at an extreme. Usually such situations see a rebound.

Further, among Nifty December month options, activity in calls far exceeds that of puts. Put OI is concentrated at ATM, and at psychological points of 17500 and 17000, which do not reflect a positioning bias. However, OI and activity along calls are spread across the near OTMs suggesting that traders have been trying to capitalize on the falling momentum by building shorts. Given the rise in VIX over the week, this is a risky position to be in as short covering is highly likely.

Nifty Bank slipped below the 42,00 mark. What are the key levels to watch out for the coming week?
41600, the level that had kept the lid on upsides in September as well as November 2022, will be the level to watch out for in Bank Nifty.

PSU bank stocks have been on a downhill path. Stocks like Punjab and Sind Bank, Central Bank of India fell over 20% each in the week. Is this the end of the rally?
The September rally that lasted through December has retraced to the 38% fibonacci, a convenient level to bounce, unless panic does not resurface. Further the present decline appears more of a corrective move rather than a part of a new bear trend.

Do the technicals indicate a further upside in pharma stocks amid rising fears of Covid?
Though pharma stocks took a beating in the last two days, the Nifty Pharma index closed near the 7-day MA suggesting that upside attempts are alive. An unilateral upside is not expected though, as distribution could resurface on a 3% spike.

Which are the top 3-4 stocks that would be on top of your radar for the week?

Brigade Enterprises (CMP: Rs 471)
View: Buy
Target: Rs 485 - 505
Stop loss: Rs 455

After consolidating for a couple of days, the stock witnessed a strong pullback with MACD about to cross the signal line and price breaking above PSAR value of Rs 478. We expect the stock to move towards Rs 485 initially and thereafter towards Rs 505 in the next two to three months. Protect longs with stop loss placed below Rs 455 with a one-month view.

Novartis (CMP: Rs 689)
View: Buy on dips
Target: Rs 715 - 750
Stop loss: Rs 656

After retracing close to the 61.8% Fibonacci level early this week, the stock witnessed a pullback which seems to be backed by MACD and Psar breakout on the daily time frame. We expect the stock to move towards Rs 715 and thereafter towards Rs 750 levels. All longs may be protected with stoploss placed below Rs 656 with a one month view.

M&M (CMP: Rs 1224)
View: Buy
Target: Rs 1300 - 1340
Stop loss: Rs 1184

Current pullback seems to have found a base near the support zone of Rs 1,202 with a doji candle formed on daily time frame. MACD forest has seen exhaustion at lower levels favoring a pull back. We expect the stock to move towards Rs 1,300 initially and towards Rs 1,340 thereafter. Longs may be protected with a stop loss placed below Rs 1,184 with a one-month view.


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