Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : Nifty has lost about 0.60 per cent during the last five trading sessions and out of these five trading sessions, Nifty has ended in red for three trading sessions. Nifty traded much on the anticipated lines as we had mentioned in our last write-up that Nifty is likely to trade in the range of 9,000-9,450. Though it managed to move past this range on May 13 but it could not sustain above this for more than 15 minutes. The bulls managed to cross the hurdle of 9,450 with a gap-up after the announcement of big bonanza economic package to fight Coronavirus downturn but as the initial optimism faded, it got back in the range.

Technically, Nifty formed a bearish belt hold pattern on Wednesday and on Thursday; it followed up with a bearish candle with an opening downside gap. The recent gap-up opening and gap-down opening of the last three sessions could signal the formation of bearish island reversal pattern on the hourly time frame. And currently, Nifty is placed right at the end of the lower end of the range of 9,000-9,450.

On Thursday, Nifty resisted right at 20-DMA and in two out of the past three trading sessions, Nifty has managed to close below its 20-DMA. Now, Nifty is trading below 20 and 50-DMA. Further, the gap between 50 and 20-DMA is coming down. An almost 1,800 point gap between 50 and 20-DMA was seen on April 16 and now, it has come down to just 71 points. This clearly reflects the lack of direction in the past one month.

For the coming week, the level of 9,000 would be a crucial support level on the downside and on the upside, 9,450- 9,550 zones is a big hurdle. Unless and until, Nifty breaks on either side, don’t expect a trending move but once this range is breached, a sharp move can be expected.

NIFTY DERIVATIVES: Nifty Futures lost 49.25 points or 0.53 per cent since the last weekly expiry. For the next weekly expiry, open interest wise put-call ratio (PCR) is at 0.59. For May monthly series, PCR is at 1.13.

For the next weekly expiry, highest call open interest is at 10,000 strike with 12,87,225 OI, followed by 9,500 strikes with 12,49,500 OI. On the put side, 9,000 strike has 7,99,425 open interest, which is the highest. The highest addition in open interest was seen at 9,500 call of the next weekly expiry with 8,58,675 OI and on the put side, 8,500 put has seen the highest addition in open interest with 4,89,375 OI.

For the next weekly expiry, the total call open interest is 1,02,57,975 and the put open interest is 60,10,050. For May monthly series, the highest call open interest is at 10,000 strikes with 22,50,450 OI, followed by 9,500 strikes with 17,51,700 OI. On the put side, the highest put open interest is at 9,000 strikes with 24,84,900 OI. The current derivative data suggests that the Max Pain is at 9,300.

TECHNICAL RECOMMENDATION

STOCK STRATEGY

SYNGENE INTERNATIONAL LTD ................... BUY .............. CMP Rs 339.75

BSE Code ...... 539268  Target 1 .... Rs 369 | Target 2 .... Rs 373 | Stoploss.... Rs 315

✓ Current Observation: Syngene International Limited is a contract research company. The company is engaged in providing contract research & manufacturing services in the early-stage drug discovery & development to pharmaceutical and biotechnology companies.
✓ During the sell-off in the market, the stock has dropped to the important support level of Rs 212.55 and this support is defined by a horizontal trendline. Thereafter, the stock has formed a bullish engulfing candlestick pattern near the horizontal trendline support as on weekend of April 03, 2020 and bounced sharply.
✓ Recently, the stock has given a downward sloping trendline breakout on the weekly time frame. This breakout was confirmed by the above 50-week average volumes.
✓ Currently, the stock is trading above its weekly pivot and short and long-term moving averages. The leading indicator, 14-period daily RSI, is in a super bullish zone. The weekly and daily MACD stays bullish as it is trading above its zero line and signal line. The trend strength is extremely high as the ADX is above 45 and -DI is much below +DI and ADX.
✓ Hence, we recommend buy this stock at Rs 339.75 with a stop-loss of Rs 315. The short-term target is placed at Rs 369, followed by Rs 373.

REVIEW OF STOCK STRATEGY

We had recommended buying the stock of Deepak Nitrite Ltd at Rs 552.90 in issue no. 29 (dated May 11, 2020). Post our recommendation, the stock did not sustain at higher levels and on intraday basis, it slipped below the stop-loss level but on closing basis, it has managed to close above the stop-loss level. Currently, the stock is hovering around the weekly pivot and short-term moving average, i.e. 13-day EMA. However, we can expect to see smart upmoves if it closes above the level of Rs 530. We would advise our readers to hold this stock with a stop-loss of Rs 505 on closing basis, as the stock is likely to move higher from the current levels.