Nifty Metal Index looking most lucrative: Expert

Nifty Metal index has been trading in a falling channel since the past two years and is currently at the lower end of the same. 

Where are we: The Nifty spot collapsed more than 20% during the week to retest 8,500-mark. Eventually, it closed near 10,000-mark with a weekly change of -9.5% following the sharp recovery on Friday. On the other hand, the Bank Nifty has lost around 23% to retest 21,000 and closed above 25,000 levels. 

What is in store: On Friday, the index almost tested 8,500 mark and bounced back sharply. In addition, 8,500 is the 161.8% Fibonacci retracement level (Golden Ratio) of the move from the low of 10,004 (October 2018) to the peak of 12,430 (January 2020). There is a long term-rising trend line placed near that support zone. We are of the opinion that for the coming weeks 8,500 could be a strong base for the markets. Now since the pullback was sharper, some more hiccups can be witnessed in the coming sessions. In such a scenario, 9,400–8,800 could be intermediate support and thus it can be a fresh buying area for conservative traders. On the upside, 10,300-mark, which is a gap area, would be the real test for the bulls.

What traders can do: Nifty Metal index is looking most lucrative. It has been trading in a falling channel since the past two years and is currently at the lower end of the same. Also, there is a positive divergence in weekly RSI which indicates that metal stocks could bounce sharply. Although we witnessed a recovery in stocks like Tata SteelNSE -4.81 %, SAIL, HindalcoNSE -1.96 %, JSW Steel etc. during the previous session, they can be again bought on dips for the coming week. Apart from metals, we like stocks such as ITC, RelianceNSE -3.82 % and Tata Motors which too can be traded with a positive bias on some dip.