Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty has rallied nearly 500 points or 4.5 per cent from last Thursday closing to this Thursday. With this stupendous upmove, the bulls on Thursday reclaimed the 11,200 mark on a closing basis for the first time after March 05, 2020. Buying interest was seen across the board as barring Nifty IT, all other indices ended with gains wherein, Nifty Pharma and Nifty Auto were the top gainers. Buying interest was seen in the broader indices with Nifty Midcap and Small-cap gaining 0.96 per cent and 1.03 per cent, respectively.
In the last four trading sessions, foreign portfolio investments (FPIs) were net buyers to the tune of Rs 6,338.5 crore while, on the flip side, domestic institutional investors (DIIs) were net sellers to the tune of Rs 3,597.63 crore. Since last Thursday close, 76 per cent of Nifty constituents have managed to close in the green, while the number is as high as 92 per cent in Bank Nifty.
Nifty formed a bullish body candle on Thursday and it has almost filled the opening downside gap, which was created on March 6, 2020 (11,244-11,035) and along with this, it has also reached the upper Bollinger band. Going forward, Nifty may touch its 78.6 per cent retracement mark, which is placed at 11,377 levels. While on the downside, the 20- HMA (hour moving average), which is placed at 11,166 is likely to act as immediate support, followed by 11,050 levels.
The 14-period RSI on the daily time scale has marked a fresh 14-period high, which is a positive sign. The ADX that measures the trend strength is in a rising trajectory on the daily time scale with a reading of 34.25 and the +DI is above the –DI. Further, the MACD histogram is rising, which indicates that the momentum is picking up.
Traders should follow a strict trailing stop-loss for their long positions and should not indulge in aggressive buying.
NIFTY DERIVATIVES: Nifty Futures gained 505.10 points or 4.71 per cent since the last weekly expiry. On Thursday, Nifty Future of July contract has seen 2.63 per cent open interest addition and the current open interest of July Futures is 1,06,37,775. Also, on Thursday, Bank Nifty Future of July contract saw an OI addition of 4.93 per cent. For July monthly series, open interest wise put-call ratio (PCR) is at 1.62.
For July monthly expiry, the highest call open interest is at 11,500 strike with 33,78,900 OI, followed by 11,000 strike with 21,98,475 OI. On the put side, 10,000 strike has 38,71,875 open interest, which is the highest. The highest change in the open interest was seen at 11,000 put of July monthly expiry with 9,82,575 OI and on the call side, 12,000 call has seen the highest change in the open interest with 9,75,300 OI. The total call open interest for July monthly series is 2,62,61,025 and the put open interest is 4,25,85,900. The current derivative data suggest that the Max Pain is at 11,000 for the monthly expiry.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
AJANTA PHARMA LIMITED ................... BUY ...................... CMP Rs 1,512.00
BSE Code ...... 532331 | Target 1 .... Rs 1,600 | Target 2 .... Rs 1,630 | Stoploss.... Rs 1,425
✓ Current Observation: Ajanta Pharma Limited is a holding company. The company is a speciality pharmaceutical company engaged in developing, producing, and marketing a range of branded and generic formulations. It serves a range of therapeutic segments, such as antibiotic, anti-malarial, anti-diabetic, cardiology, gynecology, orthopedics, pediatric, respiratory, and general health products.
✓ After registering a high of Rs 1,580 on the weekend of May 25, 2020, the stock has witnessed a correction, which is halted near 38.2 per cent retracement level of its prior upward move (Rs 961- Rs 1,580).
✓ Currently, the stock has given a downward sloping trendline breakout on the daily timeframe. This breakout is confirmed by the above 50-day average volume.
✓ Along with this trendline breakout, the stock has also managed to close above the upper Bollinger band and started band walk, which is a very bullish sign.The stock's relative strength index (RSI) has reached its highest value in the last 14-days, which is a bullish sign. Also, it has managed to close above the 60 mark after a span of over two months. Further, the MACD histogram is also suggesting a pickup in the upside momentum.
✓ Hence, we recommend buying this stock for a target price of Rs 1,600, followed by Rs 1,630, with a stop-loss at Rs 1,425 level on a closing basis.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Muthoot Finance Ltd at Rs 1,132.10 in issue no. 39 (dated July 20, 2020). Post our recommendation, the stock moved higher in-line with our expectation and went on to touch the level of Rs 1,343.25. We had given a ‘book profit’ message at the level of Rs 1,170.10 through our SMS service on July 17, 2020. Thus, investors who had taken positions, according to this strategy, would have made a decent profit.