Kaynes shares plunge 43% from October peak. Is a tactical rebound on the cards or more pain ahead?
Kaynes has plunged 43.5% from its October peak, with Friday’s 12.5% drop marking the steepest single-day decline. Momentum indicators remain bearish, signaling a risk of further slide toward the year’s low of Rs 3,825. However, being nearly 26% below its 200-day SMA suggests potential mean-reversion, with a contrarian recovery target at Rs 4,541 and downside below Rs 4,300.
Kaynes Technologies’ sharp 43% slide from its October peak, capped by a steep 12.5% drop on Friday, has raised questions about whether the stock is approaching a reversal zone or slipping into deeper losses. While momentum indicators remain firmly bearish, its stretched gap from the 200-day moving average suggests potential mean-reversion opportunities for tactical investors.
Edited excerpts from a chat with Anand James, Chief Market Strategist, Geojit Investments Limited:
After a flat week, how would you trade the market now? Would Friday's RBI optimism carry forward on Monday as well? Friday’s optimism stemmed from the completion of a morning star pattern, signaling a potential reversal from the downtrend that began on December 1. However, while the downswing was brief, the reversal is also likely to be short-lived, as evidenced by Friday’s stall at 26,200, a key congestion resistance.
Although oscillators support a possible uptrend extension, we do not see sufficient momentum for a strong move higher. We favor a swing lower toward 26,085–26,065 initially. Alternatively, a breakout above 26,200 could trigger further gains toward 26,460–26,550, but a sharp vertical rise is less likely.
IT was among the major gainers in the week. Do you see chances of more upside?
Yes, the IT sector shows strong potential for further upside. Nifty IT has been signaling a reversal since September and recently broke above the weekly supertrend, indicating strength. The weekly RSI near 60, along with the index closing above its 20-week high, reinforces the positive outlook. Based on these technical cues, the index could target 39,500 in the coming weeks.
Derivative data also supports this bullish view. Over 50% of constituent stocks saw short additions in near OTM put strikes and long additions in call strikes. Additionally, 70% of stocks experienced long build-up on Friday, while 80% recorded weekly short covering, suggesting traders are positioning for further gains. Heavyweights like TCS, Infosys, HCL Tech, Wipro, and Tech Mahindra show strong weekly charts and are expected to lead the rally toward 39,500.
PSU banks were under selling pressure but recovered on Friday. Does the chart indicate a fresh 52-week high again going forward?
Even though the index saw a pullback on Friday, the charts suggest a mixed outlook. The wedge pattern breakout in September and the resulting upside has been losing momentum since November. The recent breakdown below the rising trendline near 8,500 indicates a possible short-term trend shift, while the weekly MACD shows exhaustion candles, signaling early signs of consolidation. Despite this, longer-term charts still reflect underlying strength, keeping the possibility of a fresh 52-week high alive.