Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty has gained about 5.86 per cent during the last five trading sessions and out of these five trading sessions, Nifty ended in green during four trading sessions. And, for the month of April, Nifty has managed to record gain of almost 15 per cent. Bulls have been clearly dominating D-street and this can be determined by the two solid bullish range bar formed on Wednesday and Thursday. Over the last couple of weeks, Nifty has been trading in 600 points range i.e. 8,820- 9,400. On Wednesday, Nifty broke out of this range and it rallied almost 500 points thereafter. However, we feel the current up-move might stall around the level of 9,970-10,000. Wondering why are we saying so? Because firstly, the 50 per cent retracement of the entire fall from its all-time high is placed at 9,970, Secondly, during the 12-day range trading, Nifty traded in almost 600 points range and if we add 600 points to the breakout level of 9,400, we get 10,000 as the target and thirdly, 10,000 is a big round number hence, it would act as a psychological barrier for the index to cross. However, stalling of movement does not mean we got and blindly short the index, it means not to indulge in aggressive buying and be prepared to buy on the dips, where the risk-reward is favourable. In the near term, an immediate support for the index is 9,600 and the major support for the index is placed at 9,400. Overall, we expect the index to trade in the range of 9,600-10,000 in the coming week.
NIFTY DERIVATIVES: Nifty Futures gained 564.15 points or 6.06 per cent since the last weekly expiry. For the next week expiry, open interest wise put-call ratio (PCR) is at 1.44. For May monthly series, PCR is at 1.99. For the next week expiry, highest call open interest is at 10,000 strike with 10,86,075 OI. On the put side, 9,500 strike has 9,98,100 open interest, which is the highest. The highest net addition in open interest was seen at 9,500 put of next week expiry with 6,40,350 OI and on the call side, 10,000 call has seen highest net addition in open interest with 6,03,375 OI. For the next week expiry, the total call open interest is 59,90,850 and the put open interest is 85,97,625. For May monthly series, the highest call open interest is at 9,500 strikes with 9,82,200 OI, followed by 10,000 strikes with 9,21,000 OI. On the put side, the highest put open interest is at 9,000 strikes with 25,09,875 OI. The current derivative data suggests that the Max Pain is at 9,500. After assessing the data, we believe that Nifty is likely to trade in the range of 9,500-10,000 in the next couple of trading sessions.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
PETRONET LNG LTD .......................... BUY ................... CMP Rs 243.25
BSE Code ...... 532522 Target 1 .... Rs 260 | Target 2 .... Rs 271 | Stoploss.... Rs 225
✓ Current Observation: Petronet LNG Limited is engaged in the sale and import of regasified liquefied natural gas (LNG).
✓ The benchmark index-Nifty and the stock have formed bottom on March 24, 2020 but since then, the stock has relatively outperformed the index. From the low of March 24, Nifty has gained almost 31 per cent while, the stock has gained almost 43 per cent.
✓ Recently, the stock has managed to close above horizontal trendline and 61.8 per cent retracement of its prior downward move (Rs 271- Rs 170.40). Considering the daily time frame, on Thursday, the stock has managed to close above Upper Bollinger band and started band walk, which is a very bullish sign. With this, the short-term moving average, i.e. 20-day EMA has turned up, indicating a bullish momentum.
✓ The leading indicator, the 14-period daily RSI, has recently given a consolidation breakout and currently, trading above 60 mark comfortably. The weekly RSI is also in a rising trajectory. The daily MACD stays bullish as it is trading above its zero line and signal line.
✓ Hence, we recommend buying this stock for a target price of Rs 260, followed by Rs 271, with a stop-loss at Rs 225 level on closing basis.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Alembic Pharmaceuticals Ltd at Rs 698.55 in issue no. 27 (dated April 27, 2020). Post our recommendation, the stock moved higher in-line with our expectation and went on to touch the level of around Rs 801.90. We had given a ‘book profit’ message at the level of Rs 740.30 through our SMS service on April 24, 2020. Thus investors, who had taken positions, according to this strategy, would have made decent profit.