Nifty’s 5-day fall may be nearing a reversal; Anand James maps key levels for this week

Edited excerpts from a chat:

The five-day non-stop selling has revived concerns of a longer downturn in the market. What does the weekly candle indicate on where we are likely to end the July series?
The consecutive falls that resigned Nifty to a close below lower bollinger band on Friday raises the prospects of a mean reversion move. Further, 20-week SMA at 23741 is also nearby, providing support, should there be weakness early next week. However, weekly oscillators are not positioned to support vertical rise.Banking stocks triggered the initial correction, but selling subsequently spread across sectors. Is Bank Nifty still leading the market lower, and where do you see its next support?
Banking stocks came under pressure this week and remained negative on most of the days. However, Bank Nifty seems to be approaching a critical support zone around 56,500-56,000, where a rising trendline from the May lows remains intact.

Live Events

The recent decline looks more corrective than structural, with the index continuing to maintain its broader higher-high, higher-low trend. As prices approach a strong demand area, the probability of a rebound is increasing. A sustained hold above 56,500 could trigger fresh buying interest and potentially drive Bank Nifty towards 57,800-58,200, with 59,150 as the next upside target.

Supporting this view, momentum indicators have cooled from overbought levels, indicating that selling pressure may be losing steam. Derivative data is also encouraging, with nearly 40% of stock futures witnessing short covering on Friday and a reduction in bearish positions on a week-on-week basis, suggesting traders are positioning for a near-term recovery.

Among key banking heavyweights, HDFC Bank, SBI, and Axis Bank are showing signs of base formation, which could provide the catalyst for a rebound in Bank Nifty.

That said, a decisive close below 56,300 would invalidate the bullish view and raise the risk of a deeper correction. Until then, the technical setup continues to favor a bullish reversal.

India VIX moved higher as crude oil crossed $100 and foreign investors continued selling. What are the options data, open-interest structure and volatility indicators signalling for the coming week?
VIX rose a little over 4% on Friday, but eased in the second half, ensuring a close below the month’s high seen in early July. In summary, neither the rate of recent rise of VIX nor its present level in absolute terms or in comparison with the month’s peak is suggestive that fear is at an alarming level. At least not yet. Meanwhile, long addition along the OTM puts peaks at 23000, with highest activity seen at 23300 in the July expiry contracts. A similar trend is also seen in the 04 August contracts. This positioning for a 1.5 to 3% downside is consistent with speculative stances, and do not yet point to major collapse.

HDFC Bank ended the week 9% lower after its earnings-triggered breakdown. Is the stock now technically oversold, or do the charts indicate another leg of downside?
Four consecutive days of close below the lower bollinger band raises the chances of a mean reversion upmove. This view also finds encouragement from the fact that the stock price is very approaching a horizontal support that runs close to the April and June lows, from where significant upmoves had previously unfolded.

Also Read: Costs and provisions down, IDFC Bank will continue to bolster earnings: V Vaidyanathan, MD & CEO

Bajaj Auto jumped more than 5% following its results, while M&M Financial Services surged nearly 8% in a session. Are these sustainable breakouts with scope for follow-through, or isolated earnings-driven spikes in a weak market?
For M&M Fin Services, an inside bar formed on Thursday, points to a near term downside reversal. However, a range breakout that unfolded a few days back, will retain its structure, and allow continuation of uptrend, if downsides end before penetrating 340. Similar formation is seen in Bajaj Auto, but being in the early stages of breakout, we pin more hopes of continuation of uptrend. This can be played with stop loss near 10800.

Give us your top ideas for the week ahead
KARURVYSYA (LTP: 339)
View: Buy
Target: 360 – 425
SL – 288
Karur Vysya Bank has delivered a strong technical breakout on the weekly chart, supported by a decisive Supertrend buy signal and a bullish MACD crossover, indicating a potential shift in medium-term momentum. The stock has also registered a breakout from a multi-week consolidation zone, accompanied by a significant spike in trading volumes, highlighting strong institutional participation.

The combination of price breakout, improving momentum, and expanding volumes suggests that the ongoing upmove could have further legs. As long as the stock sustains above the breakout zone, the bullish structure is likely to remain intact.

From a trading perspective, the stock offers an attractive risk-reward setup with upside potential towards 360 initially and 425 over the medium term. Traders can maintain a positive bias with a stop-loss at 288 on a closing basis.

Overall, the technical setup points to a strengthening trend and favors a continuation of the upward move in the coming weeks.

GREAVESCOT (LTP: 246)
View: Buy
Target: 262
SL – 232
Greaves Cotton is showing signs of renewed strength after finding support near the 61.8% Fibonacci retracement level, a zone often associated with trend continuation. The stock has also rebounded from its daily Supertrend support, indicating that buyers are actively defending key levels.

Adding to the positive setup, the monthly MACD has generated a bullish signal crossover, highlighting improving long-term momentum and suggesting the possibility of a fresh upward leg. The recent pullback appears to have helped the stock consolidate gains while maintaining its broader uptrend.

As long as the stock holds above 232, the bullish structure is likely to remain intact. A sustained move higher could pave the way for an advance towards the immediate target of 262.