Adani Ports among 4 sell ideas from Axis Securities this week

“Adani Ports demonstrates a bearish sentiment as it recently breached the medium-term upward-sloping trendline. It is currently trading below critical moving averages (20, 50, and 200-day SMA), accompanied by a persistently lower daily RSI relative to its reference lines,” he says.

Edited excerpts from a chat:

Nifty has now been scaling new peaks every other day. Are the charts giving overbought signs?
Since March ’23, Nifty has displayed a remarkable “V” Shape recovery, surpassing its previous swing high of 18888 on a weekly closing basis. This impressive rally has been primarily driven by sectors such as Auto, Banking, Pharma, Capital goods, Consumer Durables, FMCG, and Healthcare, indicating strength across a wide range of sectors.

In the current weekly price action, the benchmark index has formed a small bullish candle with a long upper shadow, suggesting some higher-level profit booking. This pattern bears a resemblance to the
“Shooting Star”, which is a short-term trend reversal pattern. However, this pattern’s validation would require a weekly follow-up close below 19230. In such a scenario, a short-term profit booking towards 19000-18900 levels cannot be ruled out.

Despite this short-term profit booking, the broader picture reveals that the medium to long-term trend remains bullish. Hence, any minor price corrections should be seen as a buying opportunity for traders. The buying momentum is expected to continue to propel the index towards the 19800-20000 levels in the upcoming weeks.

PNB was among the top performers, with an upside of around 15%. What would be your trading strategy in the stock?
On the short to medium-term charts, the stock experienced a trend reversal forming a series of higher tops and bottoms formation. In recent price action, the stock is successfully trading above its 20, 50, 100, and 200-day simple moving averages (SMA), signifying a solid comeback of the bulls. This rebound is further supported by significant trading volumes, indicating increased participation and buying interest in the stock.

The daily and weekly “Band Bollinger” buy signal suggests increased momentum in the stock. Short-term support levels are observed around 55-53, providing a potential floor for price corrections. On the upside, the stock has the potential to extend its momentum towards the 70-85 levels. Hence traders are advised to adopt buy on dips strategy with a short to medium-term time horizon. The daily, weekly and monthly strength indicator is in favourable terrain, showing rising strength.

PSU banks were a major positive surprise during the week. How do you read the rally, and are there any stocks that have further steam left?
The Nifty PSU Bank index exhibits strength across all time frames, characterized by higher tops and bottoms. In December ’22, the index reached a new high at 4617.40 levels, signalling bullish sentiments in the market. Additionally, on the monthly and quarterly charts, the index is now positioned for a potential “multi-year” breakout zone at 4620 levels. This indicates the possibility of a significant upward movement in the index.

Furthermore, the index is trading above its long-term averages of 100 and 200-day simple moving averages (SMA), further supporting the bullish sentiment. The short-term support zone is identified around 4200-4000 levels. On the upside, this rally in the index may extend towards 4700-4950 levels. Considering the overall market conditions, this rally is expected to continue towards new highs.
Therefore, any minor corrections observed should be seen as buying and accumulation opportunities for investors.

TCS and HCL Tech are going to announce their June quarter numbers on July 12. What should be the trading strategy ahead of the results?
In the June expiry, there was a rollover of 92% in TCS & 84% in HCL Tech, and both started the July expiry with total futures OI of 1,17,92,725 & 1,10,43,900, respectively. The current total futures OI of TCS stands at 1,17,03,825, unwinding 88,900 shares to date and have seen a price gain of 3.5%, indicating short Covering. While in HCL tech, the current OI is at 1,28,08,600, adding 17,64,700 shares in the current expiry with a price cut of 1.67%, indicating a short build-up.

The strategy we suggest for TCS monthly expiry of June 27 is a long straddle of 3340, i.e. buying one lot each of 3340 calls @ 67 and 3340 put @ 68 with a total premium outflow of Rs 23,625/-. Based on the historical observation, we expect the current implied volatility, which is at 18%-19%, to increase from 23% to 25%, leading to an increase in premium irrespective of direction during the result announcement. Secondly, the current IVs are slightly higher than the previous quarter when results were announced, hinting towards a possible wider price action this time. The upper BEP for TCS is at 3475 & Lower BEP is at 3205.

For HCL Tech, we suggest a directional strategy, namely PUT Spread, which consists of Buying one lot of 1150 PUT @ 32 and simultaneously selling one lot of 1100 put @ 13 with a maximum loss of Rs 13,300/-. The gains in strategy are capped at Rs 21,700/- if HCL TECH is on expiry close below 1100, as the sold OTM Put (1100 strike), which has augmented to bring down the cost of Long Put, has also modified the strategy into limited profits as the gains of long 1150 strike Put will be offset by the sold 1100 strike Put. BEP for the strategy is at 1131.

Eicher Motors was the top loser during the week within the BSE500 pack. Does the chart indicate more selling ahead?
Eicher Motors emerged as the top loser in the BSE 500 pack, recording a significant loss of 11%. In contrast, the BSE 500 index delivered a modest gain of 0.83%. The stock broke below its consolidation range of 3750-3500 and important moving averages, such as the 20, 50, 100, and 200-day simple moving averages, highlighting a negative bias. It has reached immediate support at the Rs 3150 level, and a break below that may lead to further downside potential towards the 3000 level.

Any potential bounce towards the daily 200 SMA at 3370 is a favourable opportunity for shorting. Additionally, the daily strength indicator, RSI, remains below its respective reference lines, further confirming the negative bias in the stock.

Share 3-4 stocks that you would recommend a sell on at this stage.
Below are the stocks recommended for a sell:
1) Adani Ports: CMP Rs 719. Target price: Rs 670, 650. Stop loss: Rs 748
Adani Ports demonstrates a bearish sentiment as it recently breached the medium-term upward-sloping trendline. It is currently trading below critical moving averages (20, 50, and 200-day SMA), accompanied by a persistently lower daily RSI relative to its reference lines.

2) UPL: CMP Rs 663. Target price: Rs 625, 600. Stop loss: Rs 690
UPL displayed a medium-term downtrend, consolidating within a short-term range of 700-665. With the recent close below 665 and the confirmation of lower high lows, the stock signals a continuation of weakness, emphasizing a bearish outlook.

3) Aarti Industries. CMP: Rs 472. Target price: Rs 445, 425. Stop loss: Rs 495
Aarti Industries exhibited a medium-term downtrend while consolidating between the short-term range of 570-490. However, the recent close below the lower band of the consolidation range and increased selling volume, coupled with the daily strength indicator RSI being below its reference lines, suggests a negative bias in the stock.

4) Ambuja Cement. CMP: Rs 418. Target price: Rs 385, 370. Stop loss: Rs 438
Ambuja Cement exhibited a counter-trend bounce within a rising channel formation, following a decline from the 600 level. The stock retraced 50% of the Fibonacci retracement from 600-315, forming a short-term resistance level at 460. However, the recent break below the lower band of the channel, along with the formation and subsequent break of a head and shoulder pattern, indicates a negative trend in the stock.