Kunal Bothra on 2 stocks to watch on election result week
“We are yet to cross the hurdle resistance of Nifty at around 11,500 zone plus or minus 50 points.”
On Interglobe Aviation or IndiGo.
The stock needed some breather. It was trading on a very strong footing. There was hardly any correction in the stock price in the last four to five months. The stock gained significantly on the back of the news flow from Jet Airways.
Now on news of promoters’ fighting each other generally tapers down investors’ reactions and the stock came to a moderate trading range. I believe that post the news flow. the price corrected from Rs 1,600 to almost Rs 1,400-1,420 on Friday. This gives an indication that the stock could now re-define a range. It could go into a prolonged consolidation where the volumes dry out and the stock comes back to a trading range around Rs 1,400 to Rs 1600. That is what the short-term traders should be focussing on.
Longer term, the patterns are quite strong for IndiGo but with this short-term impact, the stock may remain in the midst of a downward drift and a consolidation mode over the next couple of weeks.
On Tata Global Beverages
Tata Global Beverages looks extremely attractive after this weekly move. The stock has gained 18%, but do you buy it at 18% high? Look at the similar kind of volume take on the weekly charts for Tata Global. Almost two years or three years back, at somewhere around Rs 1016-1017, the stock had given such kind of similar price breakout on the weekly charts in a similar price up move.
The stock was almost at 200 levels there itself and over the next one year it climbed up significantly higher. So when there is a new trend in the making, those new resetting trend is extremely sharp and fast and which is where I believe Tata Global should be poised over the next one year.
As a longer term play. this seems to be a very attractive chart now because of this strong price and volume breakout on the longer term time aspect.
On massive volatility in pharma stocks
Purely a sentimental analysis. 2015 onwards, when the index was correcting, there was a hope that the pharma index would kick back. It was one of the leaders of the previous bull market. In 2017 when the index was at 8,000 levels, hope was given away. There was disappointment and people caved in, exiting their pharma stocks. There was a hope rally post that as well and now there is a sense of denial.
In terms of sentimental cycle where you do not just expect the index to kick up any sort of trend is where classic bottoms are made. This is where the pharma index should be positioned. Maybe in terms of price bottoms, you may see the prices correcting by another 8% to 10% but in terms of sentiment we are very close to bottom on the pharma index on the longer term charts.
On what to expect next week
The next would be extremely choppy. We have seen this historically as well that the election week is where you see volatility becoming extreme. That was so in the last two elections at least. You have to try and limit your risk in such kind of scenarios -- be it in terms of stop losses or the position sizing as the case maybe on individual basis.
In terms of the Nifty trend, I still believe that we have not crossed that hurdle resistance of the Nifty which is at 11,500 zone plus or minus 50 points from that level. Till the time we do not cross that on the Nifty spot levels, it becomes very difficult to anticipate that this could be a change of trend or not. As of now, in the last two days, we have seen a very strong recovery. We have come back hitting that strong resistance mark but that needs confirmation both from the internals as well as on the Nifty.
Till the time we do not see that, we expect the Nifty could remain in a prolong period of broad range over the next couple of days.
Next week is going to be volatile and so I will go with all the solid, sturdy and the strong names. In terms of the chart patterns, I have picked up two names – one of them is SBI, the stock looks extremely strong. Post its result, the stock is now into a very strong uptrend even in the short term timeframe charts. So, that is a buy, Rs 334 is the target, stop loss is at Rs 311.
HDFC Bank is also one of the strong contenders of a breakout on the weekly and the monthly charts. After a brief consolidation, the stock is looking quite strong, inching towards its previous swing high and life high as well.
So HDFC Bank is also a buy, target is at Rs 2,450 and stop loss at Rs 2,300.