Chartist Talk: Can Nifty 50 extend gains towards 23,500 next week? Sudeep Shah's top picks are TVS Motor, Eternal

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Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities, believes the Nifty has a strong possibility of holding above the 23,000 mark and attempting a move towards 23,500 next week, provided it sustains above its key support zone of 22,800-22,750.

Nifty has formed a strong bullish candle on the weekly chart after a Doji formation in the previous week, indicating a potential trend reversal from a crucial support area, he said in an interview with Moneycontrol.

Even after recent sharp rally, Sudeep Shah has not yet shifted from a ‘sell on rallies’ approach to a ‘buy on dips’ strategy.

Meanwhile, he is bullish on TVS Motor Company, and Eternal for next week. "TVS Motor has given a downward sloping trendline breakout on the daily timeframe, while the price action and indicators alignment suggests that Eternal is poised for a breakout and move higher," Sudeep Shah said.

Is the significant trendline breakout in Indian Hotels indicating the potential for a sustained uptrend?

Indian Hotels broke out of its four-month consolidation range of Rs 701–757 on October 16, supported by rising volumes. The widening DI lines, with DI+ comfortably above DI-, indicate bullish dominance. RSI’s trendline breakout and MACD moving above zero further reinforce positive momentum, signalling potential for a sustained uptrend.

Given the strength in technology stocks, do you see the Nifty IT index breaking out above its horizontal resistance and the Head and Shoulders pattern’s trendline?

Yes, Nifty IT appears well placed for a breakout above its key resistance zone. The index has rallied nearly 15.5% from its September low and has already broken out of an Inverse Head & Shoulders pattern. Momentum remains strong, with the RSI near 73, while the Nifty IT/Nifty ratio chart has also given a bullish breakout, indicating improving relative strength.

Do you see a strong possibility of the Nifty 50 holding above the 23,000 mark and climbing past 23,500 next week?

Yes, Nifty has a strong possibility of holding above the 23,000 mark and attempting a move towards 23,500 next week, provided it sustains above its key support zone of 22,800-22,750. The index has made a sharp recovery after witnessing nearly a 10.5% correction from its August high, supported by easing global concerns, moderation in US bond yields, and stability in crude oil prices.

From a technical standpoint, Nifty has formed a strong bullish candle on the weekly chart after a Doji formation in the previous week, indicating a potential trend reversal from a crucial support area. The index has also reclaimed its short-term moving averages, while momentum indicators have turned constructive, suggesting improving buying interest.

However, the sustainability of the rally will largely depend on broader market participation, which remains relatively muted, and the outcome of the earnings season. In particular, results from HDFC Bank, ICICI Bank, and Axis Bank will be closely watched given their significant weightage in the benchmark indices. A decisive breakout above the 23,400-23,450 zone could pave the way for an advance towards 23,650, while the 22,800-22,750 zone remains the key support for maintaining the positive bias.

Does Friday’s consolidation in Bank Nifty signal the potential for a strong upmove beyond 57,000 next week?

Yes, Friday’s consolidation appears to be a healthy pause rather than a sign of weakness, and Bank Nifty has the potential to move beyond 57,000 next week. The index has extended its pullback rally for the second consecutive week and formed a bullish candle with a long lower shadow, indicating buying interest at lower levels.

Technically, Bank Nifty is trading above its 20-day EMA, which has started turning higher, while the daily RSI remains in an upward trajectory, reflecting improving momentum. However, the immediate hurdle is placed at 56,000-56,100, coinciding with the 50-day EMA. A sustained move above 56,100 could trigger a fresh rally towards 56,600 initially and potentially 57,300, thereby taking the index above the 57000 mark.

That said, the outcome of HDFC Bank, ICICI Bank and Axis Bank earnings will remain crucial, as these heavyweight stocks can significantly influence Bank Nifty’s near-term direction. On the downside, the 55,300-55,200 zone remains a key support area.

Have you shifted your trading strategy from selling on rallies to buying on dips?

No, we have not yet shifted from a ‘sell on rallies’ approach to a ‘buy on dips’ strategy. While the recent pullback has been encouraging, the recovery has largely been driven by select large-cap IT stocks and a handful of heavyweight counters. Broader market participation remains weak, with the Nifty Midcap 100 and Nifty Smallcap 100 continuing to underperform the frontline indices.

For a sustainable bullish stance, we would like to see stronger participation from midcaps and smallcaps, along with an improvement in overall market breadth. Until then, the ongoing recovery should be viewed as a pullback within a broader corrective phase rather than the start of a broad-based uptrend. Hence, we remain cautious and prefer a selective approach rather than aggressively buying every dip.

What are your top two stock picks for next week, and what are the key technical triggers behind them?

TVS Motor Company

TVS Motor Company has given a downward sloping trendline breakout on the daily timeframe. Recently the stock witnessed a rebound from its 200-day EMA and has steadily moved higher since then. The RSI moved higher from the oversold territory, indicating renewed bullish momentum. The ADX has started to rise gradually, indicating a gradual buildup in bullish trend strength.

The MACD line has crossed over the signal line, further reinforcing bullish bias. Additionally, the stock also reclaimed its 20-week EMA after having closed below the same in the previous week, indicating an improvement in the near-term sentiment. Hence, we recommend accumulating the stock in the zone of Rs 4,065-4,105 with a stop-loss of Rs 3,940. On the upside, it is likely to test the level of Rs 4,400 in the short term.

Eternal

Eternal has been consolidating in a Rs 344-311 range since the last 2 months. Despite the consolidation, the stock is holding steady above its key short and long term moving averages. The ADX line has turned flat, indicating a pause in the bullish momentum. The DI lines are on the verge of converging as the bulls try to assert their dominance over the sellers.

The MACD histogram bars have started to shrink on the daily timeframe, indicating a possibility of limited downside in the near term. The stock has been steadily holding around its 50-day EMA and the price action and indicators alignment suggests that the stock is poised for a breakout and move higher. Hence, we recommend accumulating the stock in the zone of Rs 322-328 with a stop-loss of Rs 310. On the upside, it is likely to test the level of Rs 350 in the short term.

Are the technical charts of Shyam Metalics indicating a strengthening bullish trend?

Shyam Metalics has witnessed a double-bottom neckline breakout on the daily chart, supported by rising volumes. The RSI has also broken above its downward-sloping trendline, indicating renewed bullish momentum. Additionally, the MACD has crossed above its signal line, accompanied by rising histogram bars, further reinforcing the strengthening bullish trend.