Rajesh Bhosale’s 2 top trading ideas: TCS & Ashok Leyland

Rajesh Bhosale, Technical Analyst, Angel One, suggests buying Tata Consultancy Services, despite its underperformance. The stock is at a multi-year support level, indicating a potential bounce. Ashok Leyland is another pick from the auto sector. A bullish reversal pattern suggests positive movement. Targets are set at Rs 3,100 for TCS and Rs 130 for Ashok Leyland.

How do you look at the market movement right now? Sectors are trying to catch up and momentum is being built in the market so far. What is the support according to you and where do you see resistance in today's trade?
Rajesh Bhosale: Today we definitely saw some respite in the market after the last five weeks of consolidation or selling pressure. In fact, both Nifty and Bank Nifty are trading at a crucial juncture. Multi-month lows are placed somewhere around 24,500 for the Nifty where May and June swing lows were seen. For the Bank Nifty we are seeing support around 55,000 which coincides with daily 89 EMA. Both key indices are at key support and if we see some key derivative data, last week the long-short ratio plunged. Markets are now at key supports and are a bit oversold.

At current levels, ahead of policy, we expect some rebound in the market. So, as long as 24,500- 24,600 holds, one can have a stock specific action. On the higher side, 24,850, 24,900 would be the resistance for the Nifty whereas 56,300, 56,500 would be the resistance for the Bank Nifty.

I want to understand from you the Bank Nifty play here because you mentioned the resistance level of 56,500. In today's trade, the Bank Nifty particularly was not participating earlier and now it has joined the party. How should one play till policy on Bank Nifty and also do you have any specific stock recommendation?
Rajesh Bhosale: As you highlighted, we are not seeing any major traction, but on the hourly charts, we are seeing some positive divergence and double bottom formation and dips towards 55,500 on the spot levels, could be taken as a buying opportunity. On the higher side, 56,000 would be the resistance followed by 56,300. So, Bank Nifty is on a support, some kind of positive divergence is happening and since it is oversold, a dip should be taken as a buying opportunity for a trading bounce towards 56,000 to 56,300 levels.

We are eyeing the RBI credit policy this week and the rate sensitive baskets will be on the focus radar. But apart from that, what are the stocks which you have brought for us? What are the trading ideas for the day?
Rajesh Bhosale: My first buy call is a contra bet on underperforming stock – TCS. It has been an underperformer. In fact, the entire IT space has been an underperformer. But if we see the chart structure of TCS, it is now placed at a multi-year support level. If we see the RSI smoothened indicator, it has slipped towards the levels of six points. So it is deeply oversold and at a very crucial support. So, the stock is showing good risk-reward at the current juncture. We are expecting a trading bounce or maybe a strong move from current levels. So, with a stop loss of Rs 2,977, TCS can be bought. We are expecting the first target of Rs 3,100 if the momentum continues towards the Rs 3,150-3,180 level. So, TCS looks positive at the current juncture.

Since TCS was one underperforming stock, the other stock I would pick from the performing sector, the auto space. The second buy call is on Ashok Leyland. On Friday, we saw a bullish reversal hammer pattern on the daily chart with prices holding on to 89 EMA and today we are seeing a follow-up buying in Ashok Leyland with a stop loss of Rs 119, Ashok Leyland can be bought. We are expecting a near-term target of Rs 130 in this counter.