Technicals
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : After experiencing a highly volatile week, Nifty gained 52.45 points or 0.48 per cent since last Thursday. Nifty took support at the 61.8 retracement of Oct-June rally. As we mentioned earlier, the level of 10800 is critical for the market for the near future. As long as this level holds, we can witness a counter-trend rally. It has also closed above the 8-EMA for the first time after 15 trading sessions. The Nifty is making higher lows and higher highs, which is a sign of some recovery from the bottom. The indicators are trying to come out of oversold condition. The leading indicator RSI has broken out of falling wedge pattern, which is a bullish sign. The MACD histogram is receding for the past two days. The stochastic is indicating some positive strength with positive divergence. If the Nifty is able to sustain above the 11060 level, it will test the 11224-11350 level very soon. The 10800 level will be critical for the market for at least the next two weeks. In the last leg of trading, reports surfaced in the market that the government is considering exempting FPIs from the higher surcharge, which is a sentiment booster for the market for the next few days. The follow-up government actions and follow-through price movement are important for taking a position from now.
NIFTY DERIVATIVES: Nifty futures gained 42.65 points or 0.40 per cent since last weekly expiry. The action was highly volatile, with two days of negative close and three days of positive close. On Monday, it made the lowest level for the week. The sudden positive news flow led to a sharp recovery. The roll-overs increased by 9.64 per cent and the roll-over spread is at 44.05. The Put-Call Ratio (PCR) for the August 14 week is at 0.91. For the monthly series, the PCR is at 1.13. The Open Interest (OI) rose by 0.33 per cent. The maximum Call OI is placed at 11100 strike with OI of 1201500. The next level of high open interest is at 11200 strike with OI of 955125. On the Put side, 10900 strike has the highest OI of 1107075. And the next highest OI of 959925 is at 11000 strike. For the first time after many weeks, there is long buildup in Calls in most of the strikes. The price and OI in almost all the Calls indicate some more strength in the market, with visible vis-à-vis action on the Put side. All the Put strikes witnessed short build-ups. With the current derivative data, the max pain next week is at the 11000 level.
STOCK STRATEGY MARICO ...... BUY ....... CMP Rs383.10
BSE Code ...... 531642
Target 1 .... Rs415
Target 2 .... Rs435
Stoploss ....... Rs360 (CLS)
✓ Current Observation: Marico has formed a 32-week 'cup and handle' formation and trading above the 50 and 200-DMA. It has also broken out of the 33-week bullish symmetrical triangle. The highest volume recorded last week indicated the massive buying interest generated in the stock. In the current week also, the volumes are more than 50-week average.
✓ The stock has not yet made any clear lower low on a higher time frame (monthly) chart for the past 10 years.
✓ The leading indicator RSI is also making a bullish symmetrical triangle, and it is in the bullish zone. The MACD line has reached above the signal line, which suggests build-up of positive momentum.
✓ The price strength (RS) is above 85 and the EPS strength is also as high as 90. The consistent earnings growth and 37 per cent return on equity is meeting all the CANSLIM criteria. Buy this stock at Rs. 383.10 with a stop loss of Rs. 360. The target is open towards Rs 415, followed by Rs 435.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Voltas at Rs 608.45 in issue no. 41 (dated August 5, 2019). Post our recommendation, the stock has been witnessing consolidation. However, the stock is still trading above its 200-day EMA level. The technical parameters of the stock still look promising. We would advise our readers to hold this stock with a stop loss of Rs 575 on a closing basis, as the stock is likely to move higher from the current levels.