Below Rs 130, Nykaa can see deeper cuts: Sudeep Shah

“Nykaa is in a continuous downtrend. It is trading below all its key moving averages and on any opportunities for a rise, we are facing massive selling pressure. So unless Rs 142-143 levels are crossed, this stock may slip below Rs 120 levels. If anyone is holding the stock, Rs 130 has to be the stop loss below which we could see deeper cuts,” says Sudeep Shah, Deputy Vice President, Head of Technical & Derivatives Research, SBI Securities

If we close above 18,000, does the trend change?
Absolutely. We require a close above 18,050-18,070. In the last many sessions we have seen this zone of 18,000-18,100 acting as a sticky resistance but let us just rewind back a couple of weeks and see what has happened.

Now 17,750-17,800 has been an important support. The December lows are placed there as well as the significance of these levels because if we map the prior swing up move from September 30 of 16,750 to 18,887, which is the all time high, the 50% retracement comes at the 17,750-17,800 zone. That is why this zone is very important. We have seen these levels.

The support zone was retested at least four times in the last 10 sessions. That means ahead of the Budget, the 17,750-17,800 zone has become very crucial. Now from a short term perspective, if we see today and yesterday, 17850, 17 900 and 17950 puts have seen a lot of additions. So that means lower levels around 17900, 17930 for the day should act as a strong support. On the upside if we see 18,000 strike price call, that is where the highest open interest is placed. So that could act as some kind of a sticky level. And that is what we are observing in the last couple of hours after that early 30-40 minute rally in Nifty. Nifty has been in this 25-30 point range and I feel that 18,030, 18,050 has to be crossed and then only we might see any continuation of the rally. Else it would be in this range of 17,900-18,050. This could be a broader trading range for the day.

What will be your top ideas then?
The top ideas are from a couple of sectors, which have started to outperform now. The first one is L&T. We have seen a buzz in the capital goods space since a month or so and we have seen the sector holding steady against all market declines in the last one month. The stock itself is witnessing a higher top, higher bottom formation on daily as well as weekly charts and has been outperforming in the last 10 sessions or so. While the Nifty is trading below its short term moving averages 13 DMA, Larsen is sustaining above that since past six, seven sessions. That gives us confidence that any dip in the stock could be bought from a short to medium-term perspective. We can buy this around Rs 2,180-2,185 with a stop loss of Rs 2150. The targets in this case would be Rs 2,250, Rs 2,260.

The next pick would be Mahindra and Mahindra (M&M). I've seen some kind of a pickup in the auto space also in the last couple of days after a broad consolidation. A few days back, we saw M&M witnessing a symmetrical triangle breakout as well. The stock has been holding strong in the 1,300-1,320 trading band and has been outperforming the auto index and Nifty on a larger scale.

We feel that with technical formations, we're seeing higher low formations in the stock which is also sustaining about its key moving averages, which is 13 DMA and it's trading at a two-month high. This can be bought from a short-term perspective with a Rs 1,285 stop loss and Rs 1,365-1,370 targets on the upside.

IIFL Finance is up 8% today. Mastek just reported numbers. Can you give us any call there? Also, Nykaa has a limited history with respect to charts. Is there anything you want to call out on Nykaa?
IIFL Finance is the first out of the three names that you just spelt out. IIFL Finance is in a continuous uptrend post that it had consolidated for December 20. Once again, we are seeing a volume-based pickup today. I feel that the trend is very strong. The volumes are also back to the uptrend and the stock can be bought at current levels and it all declines with Rs 490 stop loss and Rs 540-550 target.

The next stock is Mphasis, which I feel should be avoided, given that it is in a complete downtrend and lower top lower bottom formation is being witnessed there. Despite any positive triggers, there is no pickup in the stock and we're seeing the stock sustaining below its all key moving averages. So, I feel that until and unless the stock crosses Rs 2,075-2080, this is headed for Rs 1,850-1,900.

The next stock is Nykaa. It is also in a continuous downtrend. Nykaa is trading below all its key moving averages and on any opportunities for a rise, we are facing massive selling pressure. So unless Rs 142-143 levels are crossed, this stock may slip below Rs 120 levels. If anyone is holding the stock, Rs 130 has to be the stop loss below which we could see deeper cuts.

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