Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty has closed above 10,800 mark for the first time after the first week of March. Out of the last five trading sessions, Nifty ended in green for the four trading sessions and registered gains of nearly 2.5 per cent. In the same period, Bank Nifty rose nearly 4.34 per cent. The foreign institutional investors (FIIs) between July 3 and July 8 have bought shares worth Rs 1,040.67 crore, while the domestic institutional investors (DIIs) have sold shares worth Rs 1,706.37 crore during the same period.
Nifty had formed an opening gap on July 6 and thereafter, it has traded within a range of 10,676-10,848. On Wednesday, Nifty formed a bearish bar, which was an outside bar with a trading range of about 171 points whereas; the 10-day average was 125 points. However, it recouped the majority of the losses of Wednesday’s session on the weekly expiry day. Despite that, Nifty was not able to cross above Wednesday’s high but at the same time, it did not breach its prior bar low. Hence, this resulted in the formation of an inside bar on the daily chart.
Now going ahead, the level of 10,848-10,880 is a crucial resistance zone for the bulls and momentum is likely to be seen only if the bulls cross this hurdle. On the downside, a weakness could be seen if Nifty slips below the level of 10,676, and in case the index slips below this level, it would open gates for a further correction towards the levels of 10,600 or below.
For the time being, we believe that the upside may remain capped in the zone of 10,880-10,900 levels and an upward strength is only expected if it closes above its 200-DMA.
NIFTY DERIVATIVES:
Nifty Futures gained 301.85 points or 2.86 per cent since the last weekly expiry. For the next weekly expiry, the open interest wise put-call ratio (PCR) is at 1.19. For July monthly series, PCR is at 1.63.
For the next weekly expiry, the highest call open interest is at 11,000 strike with 13,82,775 OI, followed by 10,800 strike with 11,68,275 OI. On the put side, 10,800 strike has 13,08,675 open interest, which is the highest. The highest addition in open interest was seen at 10,800 put of the next weekly expiry with 10,10,250 OI and on the call side, 11,000 call has seen the highest addition in the open interest with 6,24,450 OI. For the next weekly expiry, the total call open interest is 1,02,23,025 and the put open interest is 1,21,49,550.
For July monthly series, the highest call open interest is at 11,500 strikes with 26,27,775 OI, followed by 11,000 strikes with 20,99,700 OI. On the put side, the highest put open interest is at 10,500 strikes with 18,36,300 OI. The current derivative data suggests that the Max Pain is at 10,600 for the monthly expiry.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
NILKAMAL LTD ................................... BUY ......................... CMP Rs 1,218.45
BSE Code ...... 523385 | Target 1 .... Rs 1,310 | Target 2 .... Rs 1,325 | Stoploss.... Rs 1,140
✓ Current Observation: Nilkamal Limited is a holding company, which is engaged in the manufacturing of plastic products and retail sales. The company's segments comprise of plastics, which include injectionmolded plastic articles, polymers and others. It also includes home furniture like lifestyle furniture, furnishings and other accessories.
✓ The stock has formed an Evening Doji star candlestick pattern as on the weekend of February 28, 2020 and thereafter, witnessed nearly 41 per cent correction. After registering the low of Rs 912, the stock underwent a pullback rally.
✓ On Thursday, the stock has witnessed a breakout of Cup and Handle pattern along with robust volume. The length of the cup and handle pattern was 12-weeks while the depth of the pattern was about 21 per cent. Along with this breakout, the stock has successfully managed to close above its crucial long-term moving average i.e. 200-day EMA after a span of almost over four months.
✓ The leading indicator, 14-period daily RSI, is currently quoting at 72.58 and it is in a rising trajectory. Further, the trend strength is extremely high as the ADX is above 40 and -DI is much below the +DI and ADX.
✓ Hence, we recommend buying this stock for a target price of Rs 1,310, followed by Rs 1,325, with a stop-loss at Rs 1,140 level on a closing basis.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Voltas Ltd at Rs 562.25 in issue no. 37 (dated July 06, 2020). Post our recommendation, the stock has been witnessing a consolidation along with low volume. The stock is still trading above its short and medium-term moving averages. The technical parameters of the stock still look promising. We would advise our readers to hold this stock with a stop-loss of Rs 533 on a closing basis, as the stock is likely to move higher from the current levels.