Nifty outlook and stock picks by Sameet Chavan: Buy ITC, Sell ICICI Bank

We have witnessed a good base building in the ITC stock and finally, it has managed to come out of its slumber

The year 2020 was full of unprecedented things; and 2021 seem to be following the similar footsteps. Fortunately, it has surprised us pleasantly so far as Finance Minister stood by her words and really presented a ‘never before’ Union Budget on February 1. As the market had lightened up ahead of the event, participants had all the reason to grab this opportunity with both hands and hence, we could see a gargantuan move to clock probably the biggest-gain-ever on the Budget day. Market was not done yet, in fact the exuberance level kept on rising as the week progressed to clock one of the biggest weekly gains to register new high tad above the magical figure of 15,000. 
 

Who would have thought last weekend (especially after having a terrible week of trade), Nifty and other major indices would have such a mesmerizing rally to reach record highs so soon. Many would be claiming now but practically, there would be hardly anyone who could have anticipated this. Honestly, we expected Nifty to move towards 14,000 – 14,200 but not beyond considering the last week's price action. But the way it conquered 14,200 with some authority, there was no doubt left after last Monday's session that we were heading towards record highs. The real charioteer of this spellbinding move was the financial space. Some of the banking giants took off this week as if there is no tomorrow. Now, markets have hastened towards their near term targets with this fast and furious rally so soon. Hence, it would be interesting to see how it behaves in this week. As far as levels are concerned, 15,050 – 15,200 – 15,400 are the important Fibonacci levels in the upward direction; whereas on the lower side, 14,700 – 14,500 are to be seen as key supports. 
 

Although, the banking stocks saw rarest weekly spurt last week, some profit booking was witnessed on Friday after a marathon rally. This led to a formation of ‘Gravestone Doji’ pattern on the daily chart of BANKNIFTY. The said pattern needs confirmation of price trading below the low of the candle i.e. 35,545 in this case. If this happens then we would probably see some profit booking in this week. Traders should take a note of this and ideally it’s advisable to follow stock centric approach. 

Stock recommendations:

ITC

View – Bullish
 

Last Close – Rs 234.35

This has been one of the retail favourite stocks but has failed to live up to the expectations over the past four years. However, the tide seems to have turned upwards for this marquee name now. The prices stabilized around 200-SMA on monthly chart during the March month fiasco. In the following months, we witnessed a good base building in the stock and finally, it has managed to come out of its slumber. On the daily chart, we can see a good price-volume breakout from multiple resistances and on the larger (Monthly) time frame, ‘1-2-3’ pattern is clearly visible. Traders are advised to buy on a decline towards 228 – 225 for a target of Rs 250 in coming sessions. The stop loss can be placed at Rs 215. 

ICICI BANK

View – Bearish
 

Last Close – Rs 614.15
 

The banking space has given a stupendous move since the budget day. Undoubtedly, the broader degree trend remains strongly bullish; but since the move was extremely swift, prices have entered an overbought territory. On February 5, we witnessed some signs of profit booking in this stock and the way its hourly charts are shaped up, further corrective move cannot be ruled out. However, the correction will not be big and at lower levels, we are likely to see buying emerging in this stock. Hence, only aggressive traders should look to sell with a strict stop loss. One can look to sell on a bounce towards 620 – 624 for a target of Rs 585 in coming days. The strict stop loss can be placed at Rs  637

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Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking. The analyst may have positions in one or more stocks. Views are personal.