How does the index trajectory look like after the last week’s gains?
This comes as a good recovery week for the market. When you see a rally which starts off from the first day of an expiry, it generally trickles into a multi-expiry or a multi-month up move. Banking, financials and cement stocks made a comeback. Many stocks in small sectors like sugar also made a very strong comeback. So it was not just the F&O action which was positive for the market.
In the last two-three series, we have seen the Open Interest (OI) on Nifty and Bank Nifty at a much higher scale. Now during the start of the October series, the OI was almost 25 per cent to 30 per cent down than the average of the last two-three series. You are seeing this ferocious rally because there was a lack of participation at the start of a fresh series.
After the rally in Bajaj Auto on Thursday, is there further headroom left to enter the stock?
Bajaj Auto has not seen such strong volumes in the last few years. The stock is making a fresh multi-month swing high on the back of some extremely strong cash volumes. A close near Rs 3,100 would have given more comfort to the bulls who were carrying their positions because such kind of intra-day reaction does not augur confidence in the near term.
On the chart patterns, the stock has been sideways in the last two months. I think Rs 2,800-2,900 is the support zone with resistance is closer to Rs 3,100-3,150 levels. The stock requires a lot of push, either a spate of positive news flows or high volumes. A replica of similar price and volume action can be seen in Bajaj Auto.
The stock has shown good signs but there has to be a consistent follow-up for a couple of days. If we see that, then we can build a case that the stock is now ending the consolidation phase and starting to move up higher again.
What about your picks for the week?
I am recommending a buy on Axis Bank. It is a classic inverse head and shoulder pattern on the hourly charts. Rs 440-442 is the breakout point. I would suggest buying with a target of Rs 475 and a stop loss at Rs 425.
My second buy would be Adani Enterprises. The stock has been a show stopper on the midcap front. In the last six months, it has given fabulous returns and even at current levels there has been a consistent attempt towards completing those bullish patterns on the daily charts. There is a swing breakout for the stock as it closed above Rs 300 level yet again. This could be the resumption of a trend. I would suggest Rs 324 as the target price with a stop loss at Rs 300.