Technicals Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : Nifty opened the session on a soft note on Thursday and the profit booking continued, which had begun in the last leg of the trade on Wednesday.

As a result, Nifty made a low of 14,714.75, which also happens to be the median price of Wednesday’s session. Besides, the zone of 14,720-14,755 was a change in the polarity zone, which says that once a resistance level is breached, it becomes support levels. Taking support from this level, the index bounced nearly 200 points from the lows and Nifty made a new all-time high of 14,913.70.

Bank Nifty had emerged as a superhero as it bounced more than 1,100 points from the day’s low and closed above the 35,000 mark for the first time ever. Among the banking pack, PSU Banks were the showstopper as Nifty PSU Bank index jumped more than 5 per cent, aided by better-than-expected earnings reported by the leader of the pack i.e. SBI. All the components of the PSU Bank index ended in the green today.

Meanwhile, Nifty had formed a bullish candle with a lower shadow, carrying higher high & higher low and indicating continuation of a positive bias. At the same time, the index negated a bearish implication of spinning top, which was formed on Wednesday.

Considering the robust price structure, participation seen across the board, and every dip is being bought, make us believe that Nifty is likely to scale towards the 15,000 level in the near term.

Hence, we need to remain bullish and advocate our readers to adopt a buy-on-dips strategy. Interestingly, the opening upside gap, which was formed on February 2 remains unfilled after three sessions of its formation, which is positive. Along with this, the MACD has witnessed a bullish crossover, which occurs when the MACD turns up and crosses above the signal line.

Going ahead, Nifty has its support placed in the region of 14,700-14,750 and as long as the index trades above this level, the target of 15,000 is achievable. Besides, the level of 15,000 also coincides with the upper Bollinger Band.

NIFTY DERIVATIVES: From the low of 13,666.60, which was registered on January 29, 2021, Nifty Futures of January series has gained 1,223.34 points or 8.95 per cent. Bank Nifty Futures of January series has witnessed a strong upside of nearly 19 per cent from the low of 29,752.10. For the next weekly expiry, the open interest wise putcall ratio (PCR) of Nifty is at 1.15. For February monthly series, PCR is at 1.64.

For the next weekly expiry, the highest call open interest is at 15,000 strikes with 17,48,925 OI, followed by 15,500 strikes with 15,62,175 OI. On the put side, 14,000 strikes have 13,25,625 open interest, which is the highest. Today, the highest addition in the open interest was seen at 15,500 calls of the next weekly expiry with 11,13,450 OI and on the put side, 14,000 puts have seen the highest addition in the open interest with 8,73,300 OI. For the next weekly expiry, the total call open interest is 1,34,24,700 and the put open interest is 1,54,83,150.

For February monthly series, the highest call open interest is at 15,000 strikes with 14,51,325 OI, followed by 15,500 strikes with 14,32,575 OI. On the put side, the highest put open interest is at 13,500 strikes with 23,35,875 OI. The current derivative data suggest that the Max Pain is at 14,500 for the monthly expiry.

TECHNICAL RECOMMENDATION

STOCK STRATEGY 

MANAPPURAM FINANCE LTD .......... BUY ............ CMP Rs 181.55

BSE Code : 531213
Target 1 : Rs 195
Target 2 : Rs 200
Stoploss :Rs 169(CLS)

✓Current Observation: Manappuram Finance Ltd is a non-banking finance company. The company offers loans against gold collateral, business loans, vehicle loans, foreign exchange & money transfer services and also, sells gold coins.
✓After registering the low of Rs 74.25, the stock has gained nearly 159 per cent. However, the stock has formed a bearish engulfing candlestick pattern as on the weekend of July 31, 2020 and thereafter, slid into consolidation for nearly 6 months. During the phase of consolidation, the volume activity was mostly below the 50-week average volume.
✓Currently, the stock has given a downward sloping channel breakout on the daily chart. Further, this breakout is supported by a robust volume of more than double of 50-day average volume, indicating a strong buying interest by the market participants.
✓With this consolidation breakout, the ADX, which shows the strength of the trend, turned upside and moved above the -DI. The stock is meeting Daryl Guppy’s multiple moving averages set up rules as it is trading above both the short and long-term moving averages.
✓The leading indicator, RSI has also given a downward slopping channel breakout, which is a bullish sign. The MACD line just crossed the signal line, and the histogram became green.
✓ Considering the robust technical structure, we expect the stock to continue its upward momentum and test the levels of Rs 195, followed by Rs 200 in the short-medium term. Stop-loss can be maintained at Rs 169 on a closing basis.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Gujarat State Fertilizer & Chemicals Ltd at Rs 76.60 in issue no. 15 (dated February 01, 2021). Post our recommendation, the stock moved higher in line with our expectation and went onto touch the level of around Rs 79.50. We had given a ‘book profit’ message at the level of Rs 79.05 via our SMS service on February 01, 2021. Thus, investors, who had taken positions, according to this strategy, would have made a decent profit.