Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : The benchmark index had gained about 321.10 points or 3.57 per cent during the last five trading sessions. Further, out of five trading sessions, Nifty ended in green for three trading sessions, which includes gigantic gains of three per cent registered on Friday. The broader markets have relatively underperformed the frontline indices with Nifty Mid-cap and Smallcap that rose by 1.60 and 2.01 per cent, respectively. Amongst the sectoral indices, Nifty IT, Nifty Media, Bank Nifty and Nifty Energy outperformed the frontline indices as they have registered gains between 3.96 and 4.99 per cent.
Nifty faced a resistance around 38.2 per cent of the fall from its all-time high and also, it not able to move past the upper boundary of the rising wedge point. Post facing the resistance around 9,390-9,400 mark, Nifty opened Tuesday’s session with a gap-down and ended the day below 9,000 mark. However, on the very next day, bulls fought back and in this process, Nifty almost filled Tuesday’s gap. On Thursday, we had witnessed a continuation of rally and as a result, Nifty reclaimed 9,300 mark.
For the past nine trading sessions, Nifty has been trading in a range of 8,821-9,390 levels. But within this trading range, Nifty is moving in a higher high and higher low fashion. To form a lower low for a bearish bias, Nifty will have to close below 8,909 low and on the upside, an immediate resistance is seen around 9,390 levels but a fresh leg of upmove will be seen once Nifty closes above 9,390 levels.
Overall, it’s important for Nifty to resolve this range for a good trending move. Unless and until this happens, it will continue to oscillate in this range. An oscillation between these levels will not give any clear trade.
NIFTY DERIVATIVES: Nifty Futures gained 251.65 points or 2.78 per cent since the last weekly expiry. Indian Volatility Index (VIX), a gauge for market’s short-term expectation of volatility, dipped 8.38 per cent to end at 39.23.
For April monthly series, the open interest wise put-call ratio (PCR) is at 1.31. For April monthly expiry, the highest call open interest is at 10,000 strike with 18,71,475 OI. On the put side, 9,000 strike has 35,10,450 open interest, which is the highest. On Thursday, the highest change in open interest was seen at 9,000 put of April monthly expiry with 9,48,450 OI and on the call side, 9,300 call has been the highest change in open interest with 3,05,175 OI. The total call open interest for April monthly series is 1,90,43,925 and the put open interest is 24,92,0850. Some out of the money (OTM) options also have a higher open interest. The 8,000 put OI of April monthly series stood at 26,50,425, followed by 7,500 put, along with 17,84,025 OI. The 11,000 call OI of April monthly series stood at 11,96,175. The current derivative data suggests that the Max Pain is at 9,200.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
ALEMBIC PHARMACEUTICALS LTD. ............... BUY ......... CMP Rs 698.55
BSE Code ...... 533573 Target 1 .... Rs 750 | Target 2 .... Rs 765 | Stoploss.... Rs 640
✓ Current Observation: Alembic Pharmaceuticals Limited is a pharmaceutical company. The company is engaged in developing formulations and active pharmaceutical ingredients (API). It focusses on anti-infective, analgesic as well as cough & cold therapies.
✓ Technically, the stock had formed a reversal doji candlestick pattern on April 13, 2020 and thereafter, witnessed a minor correction. The correction is halted near 38.2 per cent retracement level of its prior upward move (Rs 434.80-Rs 709) and coincides with 20-day EMA.
✓ On Thursday, the stock had formed a sizeable bullish candle along with robust volume. Currently, 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 14-period RSI, which is at 66.19 on a daily chart, shows a bullish momentum. The daily stochastic oscillator is suggesting some bullish strength as well, since per cent K is above per cent D.
✓ Hence, we recommend you to buy this stock for a target price of Rs 750, followed by Rs 765, with a stop-loss at Rs 640 level on closing basis.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Coromandel International Ltd at Rs 565.85 in issue no. 26 (dated April 20, 2020). Post our recommendation, the stock did not sustain at higher levels as a selling pressure emerged in the market and the stock slipped below the stop-loss level. We recommend our readers to exit with a loss. We exited the stock at Rs 520.80 on April 21, 2020.