Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : From the last Thursday closing to this Thursday, Nifty has gained about 539 points or 5.67 per cent. It has reclaimed its important psychological level of 10,000 and recorded its best closing since early March. The broader indices too have been in sync with the frontline indices during the last five trading sessions with Nifty Mid-cap and Small-cap rallying 5.96 per cent and 7.81 per cent, respectively. Overall, the market breadth too remained in the favour of advancers throughout the five trading sessions.
Nifty formed a shooting star pattern on Wednesday. It was in fact a NR4 bar, as the high-low range was confined to 141 points. This indicates that the bulls are tired or taking a pause after a terrific rally of almost 13 per cent from its high to low in just six trading sessions. On Thursday, it formed a high-wave like candlestick pattern, which hints again that after an uptrend, there is a standoff between the bulls and bears or it also means that the market has lost its sense of direction. Further, on Thursday, it formed a lower high and lower low, in comparison to its prior bar. Now does that mean the bear have already put the foot in the door or is it just a routine corrective decline?
We view this as a routine correction as the price is trading above 20 and 50-DMA and since, the 20-DMA is above 50 DMA; both the moving averages are in a rising trajectory now. Also, the RSI has crossed the 60-mark on the daily time scale. Hence, the trend is in the favour of the bulls. Going ahead, 9,860 is a crucial support for Nifty and on the upside, 10,250-10,300 is viewed as a resistance level.
Please keep in mind that the sell opportunities will come only below 9,860 levels. Till then, it is be better to avoid short positions and adopt ‘buy on the dips’ strategy. Also, stock-specific movement is likely to continue hence, it’s time to identify the strong performers and accumulate them at the right levels.
NIFTY DERIVATIVES: Nifty Futures gained 588.05 points or 6.23 per cent since the last weekly expiry. For the next weekly expiry, open interest wise put-call ratio (PCR) is at 1.09. For June monthly series, PCR is at 1.49.
For the next weekly expiry, the highest call open interest is at 10,500 strike with 12,95,175 OI, followed by 10,200 strike with 9,87,450 OI. On the put side, 9,800 strike has 11,62,275 open interest, which is the highest. The highest addition in open interest was seen at 10,500 call of the next weekly expiry with 8,00,025 OI and on the put side, 9,500 put has seen highest addition in open interest with 6,36,075 OI. For the next weekly expiry, the total call open interest is 92,70,375 and the put open interest is 1,01,06,100.
For June monthly series, the highest call open interest is at 10,000 strikes with 18,72,075 OI, followed by 10,500 strikes with 16,01,550 OI. On the put side, the highest put open interest is at 9,000 strikes with 34,36,600 OI. Interestingly, 9,500, 9,600 and 10,000 put has seen an open interest above 20 lakh. The current derivative data suggest that the Max Pain is at 9,900 for the monthly expiry.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
SUN PHARMACEUTICAL INDUSTRIES LTD ................ BUY ........ CMP Rs 495
BSE Code ...... 524715 | Target 1 .... Rs 530 | Target 2 .... Rs 540 | Stoploss.... Rs 466
✓ Current Observation: Sun Pharmaceuticals Ltd is India's largest company (by market capitalisation) and the world's fifth largest speciality generic pharmaceutical company. The company offers its products in therapy areas, such as cardiology, neuropsychiatry, anti-infective, diabetology and dermatology.
✓ Technically, the stock has witnessed a sharp bounce of nearly 62 per cent from its 52-week low of Rs 312. Thereafter, the stock has formed a reversal gravestone doji like candlestick pattern as on April 27, 2020 and witnessed a correction.
✓ The correction is halted near 38.2 per cent retracement level of its prior upward move (Rs 312-Rs 504.80) and it coincides with 50-day EMA. ✓ Currently, the stock is trading above its short and long-term moving averages. The 50-DMA crossed over 200-DMA eight trading sessions ago, called the 'golden crossover', which is a long-term bullish signal.
✓ The relative strength index (RSI), which is a momentum indicator, is trading in a bullish territory in the weekly and the daily time frame.
✓ Hence, we recommend buying this stock for a target price of Rs 530, followed by Rs 540, with a stop-loss at Rs 466 level on closing basis.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of PI Industries Ltd at Rs 1,591.10 in issue no. 32 (dated June 01, 2020). Post our recommendation, the stock has been witnessing a consolidation along with low volume. The stock is still trading above its short and long-term moving averages. The technical parameter of the stock still looks promising. We would advise our readers to hold this stock with a stop-loss of Rs 1,490 on closing basis, as the stock is likely to move higher from the current levels.