Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty after trading in a range of almost 320 points in the last three trading sessions moved out of the range on the higher side and recorded its best single day gain after May 27. The market breadth on Thursday was in favour of bulls as the advancers outnumbered the decliners. Amongst the sectors, all the sectoral indices ended in green.
With this surge on Thursday, Nifty has reached near its crucial resistance level as defined by the falling 100-DMA. Earlier, on two instances, Nifty has resisted at 100- DMA, firstly on June 8, when Nifty formed ‘open is equal to high’ and on June 9, when it formed a bear candle with an upper tail near 100-DMA.
Technically, Nifty has now retraced over 61.8 per cent of the down-move from the recent swing high registered on June 8. Thereafter, the index is trading up by 3.22 per cent from its 20-DMA and it has acted as a cushion for the index during these volatile times. Moreover, the gap between 100- DMA and 20-DMA became further close.
So, from the above narrative, it’s clear that once the 100- DMA is crossed, the bulls’ mood will cheer up and Nifty can be on its way to reclaim 10,300-10,350 levels. On the downside, the level of 9,980-9,990 is likely to act as an immediate support, followed by the level of 9,775 where 20-DMA is placed.
The leading indicator RSI on the daily timeframe has crossed 60-mark, which is positive. On the daily timeframe, +DI is above –DI.
Overall, traders are advised to be on the bullish side as long as 20-DMA is defended by the bulls and maintain a ‘buy on dips’ stance.
NIFTY DERIVATIVES: Nifty Futures gained 180.15 points or 1.82 per cent since the last weekly expiry. For June monthly series, open interest wise put-call ratio (PCR) is at 1.40.
For June monthly expiry, highest call open interest is at 10,500 strike with 27,07,125 OI, followed by 10,000 strike with 24,68,550 OI. On the put side, 9,000 strike has 44,35,375 open interest, which is the highest. The highest change in open interest was seen at 9,500 put of June monthly expiry with 10,87,275 OI and on the call side, 10,400 call has seen the highest change in open interest with 4,03,725 OI.
The total call open interest for June monthly series is 2,99,58,375 and the put open interest is 4,21,20,475. The current derivative data suggests that the Max Pain is at 10,000 for the monthly expiry.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
GUJARAT STATE PETRONET LIMITED ................ BUY ........ CMP Rs 224.65
BSE Code ...... 532702 Target 1 .... Rs 242 | Target 2 .... Rs 250 | Stoploss.... Rs 210
✓ Current Observation: Gujarat State Petronet Limited (GSPL) is a natural gas infrastructure and transmission company engaged in gas transportation business. The company is engaged in transmission of natural gas through pipelines on an open access basis from supply points to demand centres. It also generates electricity through windmills.
✓ After registering a high of Rs 234.80 on June 9, 2020, the stock has witnessed a minor correction. The correction is halted near 38.2 Fibonacci retracement level of its prior upward move (Rs 177.60-Rs 234.80) and coincides with 13-day EMA level.
✓ Currently, the stock is trading above its short and long-term moving averages. The leading indicator, 14-period daily RSI, is currently quoting at 69.43 and it is in a super bullish zone. The daily MACD stays bullish as it is trading above its zero line and signal line.
✓ Further, the trend strength is extremely high as ADX is above 40 and -DI is much below +DI and ADX.
✓ Hence, we recommend buying this stock for a target price of Rs 242, followed by Rs 250, with a stop-loss at Rs 210 level on closing basis.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of IOL Chemicals and Pharmaceuticals Ltd at Rs 409.60 in issue no. 34 (dated June 15, 2020). Post our recommendation, the stock did not sustain at higher levels as 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 371.55 on June 15, 2020.