Kunal Shah explains why metal stocks could be in limelight this week

“The metal index on the other end has witnessed strong buying throughout the week and is likely to continue the momentum on the upside,” says Kunal Shah, Senior Technical Analyst at LKP Securities.

In an interview with ETMarkets, Shah, said: “The dollar index has formed a medium-term top which will lead to further rally in the metal index” Edited excerpts:

We saw strong closing for Indian markets as both Sensex and Nifty hit fresh 52-week highs. What led to the price action?
The Indian indices after a volatile week witnessed a fresh breakout move on the upside on the last day of the week. The bulls managed to hold the support of 18000 and took over the command by surpassing the hurdle of 18250.

The Nifty PSU Bank index was the highest gainer with more than 6% gains. HDFC twins supported the market on the last day which help the bulls to take control.

What are the important levels that one should watch out for Nifty and NiftyBank this week?
The index has witnessed a fresh breakout on all the time frames with major participation by heavyweights. The index is likely to continue the momentum on the upside and test the all-time high levels which is around 18,600.

For Nifty, 18,100 will act as a support level which will act as a cushion for the bulls, and for Bank Nifty 41,500 should act as strong support. The upside visible targets for Bank Nifty is 43,500-44,000

India VIX fell which is a good sign but does this mean that it is a good buy on dip market? Any strategy which traders can deploy on Nifty/NiftyBank?
Nifty

STRATEGY NAME: BULL CALL SPREAD

BUY 18400CE AND SELL 18600

DEBIT SPREAD: 70

MAXIMUM RISK: 70(70*50=3500)

MAXIMUM REWARD: 130(130*50=6500)

Smallcaps and midcaps also witnessed some selling – how should one play this theme?
The Nifty Midcap index is trading in a consolidated range where the support on the lower end is seen at 30,000 and the upside resistance is at 32,000.

The bulls in order to gain full control have to surpass the resistance level of 32,000 on the upside. The index is directionless at the moment and a break on either side will decide the trend.

In terms of sectors, healthcare stocks saw selling pressure while metal stocks attracted buying. What led to the price action?
The Nifty Healthcare index faces stiff resistance at its 200DMA and is unable to surpass the level of 8600 on the upside. The index remains in a downtrend on the lower time frame with lower high and lower low formation intact.

The metal index on the other end has witnessed strong buying throughout the week and is likely to continue the momentum on the upside. The dollar index has formed a medium-term top which will lead to a further rally in the metal index.

Any 2-3 trading ideas for the next 3-4 weeks?
Here are a few trading ideas -

MindTree: Buy| LTP Rs 3663| Stop Loss Rs 3400| Target Rs 3850/4000| Upside 4-9%

MindTree on the weekly chart is on the verge of a falling trend line and has passed the hurdle of 3,500 with huge volumes.

The stock has formed s base near its 200DMA which is placed at 3,388 and the upside visible targets are 3,900-4,000 on the upside.

The momentum oscillator RSI has given a positive crossover and entered above the level of 60 which confirms the strength.

Jindal Steel: Buy| LTP Rs 499| Stop Loss Rs 475| Target Rs 525/536| 5-7%

The stock on the daily chart has formed a morning star pattern and has given a strong breakout on the lower time frame. The stock is trading in a strong uptrend with higher high and higher low formations intact.

The momentum oscillator RSI has also given a positive crossover confirming the buy signal on the daily chart. The lower-end support stands at 475 which will act as a cushion for the bulls.

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