Chartist Talk: Nifty has a strong chance of reclaiming 24,600 next week; Sudeep Shah picks 2 stocks to accumulate

The probability of Nifty reclaiming the 24,600 level next week appears reasonably high, supported by a constructive technical setup, according to Sudeep Shah, the Head - Technical and Derivatives Research at SBI Securities.

From a trend perspective, the index continues to trade comfortably above its 20-day, 50-day, and 100-day EMAs, indicating that the broader market structure remains positive, while momentum indicators are also supportive, he reasoned.

He believes monthly charts suggest the recent two-month consolidation phase may be ending, with the Nifty 50 poised for a potential breakout in July.

Sudeep Shah advises accumulation in Aditya Birla Capital and Divis Laboratories for next week. "Aditya Birla Capital has witnessed a strong breakout above the Rs 382–399 consolidation range, indicating a continuation of its upward trend, while Divis Labs continues to maintain a strong bullish structure, with the 50-day EMA providing consistent support since June," he said.

Do you expect the Bank Nifty to continue underperforming next week?

Bank Nifty has relatively underperformed the broader market over the past few weeks, but the current technical setup does not suggest a continuation of significant underperformance. The index has been consolidating within a narrow range and has formed small-bodied candlesticks with shadows on both sides for three consecutive weeks, indicating indecision and a temporary pause in momentum rather than a bearish reversal.

Looking ahead, the 58,600–58,700 zone remains a crucial resistance area. A decisive breakout above 58,700 could trigger a fresh rally towards 59,500 and potentially 60,300 in the short term. On the downside, the 57,100–57,000 zone is expected to provide strong support. As long as this support holds, the overall outlook remains constructive, suggesting Bank Nifty may narrow its performance gap rather than continue materially underperforming.

Do you see a high possibility of the Nifty 50 reclaiming the 24,600 level next week, considering the technical indicators?

The probability of Nifty reclaiming the 24,600 level next week appears reasonably high, supported by a constructive technical setup. After remaining range-bound within a 500-point band for nearly 13 sessions, the index attempted a breakout on Friday. Although profit booking at higher levels capped gains, Nifty still ended the week at 24,270, up 0.89 percent, reflecting underlying strength.

From a trend perspective, the index continues to trade comfortably above its 20-day, 50-day, and 100-day EMAs, indicating that the broader market structure remains positive. Momentum indicators are also supportive, with the daily RSI moving above 60, suggesting improving bullish traction.

That said, the 24,400–24,450 zone, which coincides with the 200-day EMA, remains an important hurdle. A decisive breakout above 24,450 could pave the way for a move towards 24,700–24,900, bringing the 24,600 mark well within reach. On the downside, 24,150–24,100 is expected to provide immediate support. Overall, while some volatility cannot be ruled out, the technical indicators currently favour a gradual move towards higher levels.

Monthly charts suggest the recent two-month consolidation phase may be ending, with the index poised for a potential breakout in July.

Could the Smallcap index hit a record high next week, given the recent breakout above the falling resistance trendline?

Yes, the chances of the Nifty Smallcap 100 hitting a fresh record high next week appear strong. The index has consistently outperformed the benchmark over the past few weeks and is currently trading very close to its all-time high, while Nifty remains nearly 8% below its record peak.

Adding to the positive sentiment, the Nifty Smallcap 100/Nifty relative strength ratio chart has surged to an 81-week high, highlighting continued leadership from the broader market segment. Technically, the recent breakout and prevailing chart structure suggest bullish momentum is likely to remain intact. The index can advance towards 19,400–19,600 in the near term, while 18,850–18,800 is expected to act as a crucial support zone.

Aditya Birla Capital has witnessed a strong breakout above the Rs 382–399 consolidation range, indicating a continuation of its upward trend. Rising RSI and ADX signal strengthening momentum, while trading above key moving averages supports the bullish outlook. The stock also shows relative strength versus Nifty. The accumulation is recommended at Rs 398–403, with a stop-loss of 385, and target of Rs 430.

Divis Laboratories continues to maintain a strong bullish structure, with the 50-day EMA providing consistent support since June. Improving RSI, a potential MACD bullish crossover, and a widening DI+/DI- spread indicate strengthening momentum. Rising weekly ADX further confirms trend strength. The accumulation is recommended in the stock in the Rs 6,705–6,775 zone, with a stop-loss at Rs 6,505 and target of Rs 7,250.

Do you expect the bullish momentum in Lodha Developers and Oberoi Realty to continue, or do the stocks appear overbought at current levels?

Both Lodha Developers and Oberoi Realty have recently broken out of consolidation ranges on the daily chart, signalling a continuation of their bullish trend. Momentum remains strong, with the RSI moving decisively above the 70 mark, reflecting sustained buying interest. The ADX has also started to rise, indicating strengthening trend momentum, while the MACD remains above the zero line with expanding positive histogram bars, reinforcing the bullish outlook.

In addition, the ratio line Nifty Realty/Nifty ratio chart has moved sharply higher, highlighting the sector's improving relative strength and potential to outperform the broader market. Although the sharp rally leaves room for some healthy profit booking in the near term, the overall trend remains positive, and the bullish bias is likely to persist as long as key support levels continue to hold.

Is the Nifty IT index showing any signs of a trend reversal, or would you prefer to see confirmation of an uptrend over the coming weeks?

The Nifty IT Index continues to exhibit a weak technical structure with no clear signs of a sustained trend reversal. The index remains in the lagging quadrant of the Relative Rotation Graph (RRG), highlighting persistent underperformance and weak relative momentum versus the broader market.

The MACD is still below both the zero line and the signal line, while a rising ADX indicates that the prevailing bearish trend remains intact. However, the 26,100–26,200 zone continues to be a crucial long-term support area, having triggered multiple rebounds between June 2022 and April 2023. While short-covering rallies or temporary pullbacks are possible, a meaningful reversal would require the index to decisively reclaim the 28,300–28,400 zone. Until then, the broader bias remains cautious.