2 stock bets for next week by Nooresh Merani

“Some of the IT names are actually down back to 52-week lows, large cap ITs pack like TCS and Infosys are closer to their June lows so that tells you there is an over contribution coming from IT,” says Nooresh Merani, independent technical analyst.

17,800 was something that you were telling us was the line in the sand. We have clearly broken below that mark, what next?
So once that level is broken, we start looking at a momentum shift. So until now you are holding above 17,800, which was a breakout from a flag pattern and had a target price of 18,200. We went very close to 18,050. 18,100 did not complete the target and now once we are below 17,800, we go back to the previous zone of 17,150 to 17,400 as the lower band of the support area and 17,800 to be a resistance. The only difference right now is we have not seen a similar breakdown in the Bank Nifty, it is still above that 14,600 to 14,400 lows, which it made a couple of days back. So what we are seeing is there is an over contribution on the downside from the IT sector.

Some of the IT names are actually down back to 52-week lows, large cap ITs pack like TCS and Infosys are closer to their June lows so that tells you there is an over contribution coming from IT as well as Reliance Industries has broken a recent swing low. So overall it is a topsy-turvy say condition in both the indices. It is not in the same momentum so that generally indicates we are getting into a consolidation rather than a trend change with deeper downside. So the view is going forward 17,150 to 17,400 on the downside will act as a support, 17,800 would act as a resistance.

On the Bank Nifty once we start breaking below 40,600 on the closing basis then that shifts towards 39,500 to 41,000 zones. So overall range shift is happening in the indices, not expecting a major correction, also given that next week we do have a Fed event as well, post that there will be more clarity whether we can get out of this range or not.

I want to specifically ask you about media counters because in the month gone by we have seen counters like Zee and Sun TV outperforming but the last week was not that great for all of these names. Would you like to go and look for some opportunities on the buying side of all of these counters or would you prefer waiting on the sidelines?
So I would prefer waiting on the sidelines. The momentum has not been strong in both these names because Zee did give a breakout above 265-267 but barely could make a move to 280, otherwise this stock has a tendency to move up 10% to 20% after a breakout. Same is the case with Sun TV. After a long period of time it has come and tested that 530 levels could not sustain above those levels. 530 was the high in April as well as in February this year as well as 530 has been a band of resistance for the last one year or so.

So we are not seeing momentum per se, the trend is positive in both these names but the momentum is not great so I would wait for some more time and then look at it in terms of the next time they break the recent highs. At that time, I would be more convinced that the trend has become momentum.

Help us spot those charts which look the most interesting from the entire consumption space. Shoppers Stop has been on a tear, Trent continues to give out great returns as well and even a lot of these consumption theme stocks, the likes of ABFRL, etc, have been doing well.

So if we look at all these stocks that tell you the market is generally a little ahead of what is expected, we have started seeing a lot of positive guidance on the festival season. If you pick up ABFRL, the stock was at 240-250 in the June bottom. It made a top of 340 in the current move, and is still at 320-330 levels. So the trend is still up and the stock has made a new all-time high. So out here, it would still be a normal thing if it corrects between 300 to 320 and that would be the zone one should be looking at to buy.

Same way Trent has made a move from closer to 1000 levels where it was in June-July to 1400 to 1480 mark. Out here, 1250 to 1300 is a buy zone. Shoppers Stop also has hit a new 52-week high. The stock is almost at a new all-time high. The stock has moved up from 400 in June all the way to 700-750. So a good part of the trade is over, but structurally the trend is positive across this space. A 5% to 10% correction from here is where I would look at investing. A fresh opportunity here, at current levels risk reward is not great in a lot of these names. So 5% to 10% correction then maybe one can start nibbling into these names.

In the previous week, you highlighted quite many interesting names and I especially remember the likes of Power Grid and NTPC, which managed to buck up quite a good gain in this week. But for the next week, which are the picks you have got for our viewers?
Being defensive here, a buy on Sun Pharma which is closer to the support of the last three weeks, a stop loss at 860 and a target price of 920 to 950 in the short term. Second is a sell on Titan which has given a short-term breakdown, keeping a strict stop loss at 2650 and a target price of 2450.