Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : From last Thursday’s close to this Thursday, Nifty has almost lost 113 points or 1 per cent. The bulk of the loss was registered in the last two trading sessions as Nifty registered two consecutive days of losses, for the first time after May 26.
Further, it has breached its identical low support of 11,150 with a bearish candle. On Thursday, the advance-decline ratio remained in favour of the bears as for every one advancing stock; we had almost two declining stocks. In Bank Nifty also, out of 12 stocks that closed in red, only one stock gained i.e. Bandhan Bank closed with minuscule gains.
The recent attempt of the consolidation range breakout had turned out to be a bull trap as Nifty had failed to see a follow-through move after closing at 11,300-mark. Now going ahead, immediate support for Nifty is placed around the levels of 11,050 and a breach of this support will have severe bearish implication on the index.
The 14-period RSI on the daily time scale has closed below the prior swing low and confirmed a negative divergence. Further, the RSI has reached near to a very crucial level of 61. Besides, in the last two instances, we saw Nifty bouncing back from the zone of 59-60. Would history repeat itself or breach this time and be different? Everything depends on the support level of 11,050.
On the upside, the level of 11,330-11,380 is likely to act as a strong resistance and only a breach of this region would open gates for bullish momentum.
Our advice to the traders would be to maintain a strict stop-loss around the level of 11,050 for all long positions.
NIFTY DERIVATIVES: Nifty Futures has gained 855.70 points or 8.35 per cent in the July monthly series. For the next weekly expiry, an open interest wise put-call ratio (PCR) is at 0.83.
For August monthly series, PCR is at 1.75. For the next weekly expiry, the highest call open interest is at 11,500 strike with 16,60,875 OI. On the put side, 11,000 strike has 15,78,375 open interest, which is the highest. The highest addition in open interest was seen at 12,000 call of the next weekly expiry with 9,72,375 OI and on the put side, 11,000 put has seen the highest addition in the open interest with 8,29,275 OI.
For the next weekly expiry, the total call open interest is 1,48,29,450 and the put open interest is 1,22,41,050. For August monthly series, the highest call open interest is at 11,500 strikes with 17,95,575 OI, followed by 12,000 strikes with 15,64,725 OI. On the put side, the highest put open interest is at 11,000 strikes with 31,04,475 OI. The current derivative data suggest that the Max Pain is at 11,200 for the monthly expiry. After assessing the open interest data, we believe that Nifty is likely to trade in the range of 11,000- 11,500 in the next couple of trading sessions.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
HUHTAMAKI PPL LTD ...................... BUY ........................ CMP Rs 241.20
BSE Code ...... 509820 | Target 1 .... Rs 260 | Target 2 .... Rs 265 | Stoploss.... Rs 222
✓ Current Observation: Huhtamaki PPL Ltd is an India-based consumer packaging company. The company offers a range of products, including specialised pouches, pressure-sensitive labels, shrink sleeves, personal care, and household products, specialised cartons, wet strength labels, shrink sleeves, and automotive as well as industrial products.
✓ Technically, after registering the low of Rs 161.90 as on March 23, 2020, the stock is forming a series of higher lows.
✓ Currently, the stock has given a downward sloping trendline breakout, formed by connecting swing highs since April 2020. This breakout is confirmed by the above 50-day average volumes.
✓ Along with this trendline breakout, the stock has successfully managed to close above its crucial long-term moving average i.e. 200-day SMA after a span of over four months.
✓ Talking about the indicators, the RSI is currently quoting at 75.75 and it is in a rising trajectory. The MACD is above the zero line and the signal line. The MACD histogram suggests bullish momentum. And most importantly, the MACD line crossed the prior swing highs.
✓ Considering the above factors, we recommend buying this stock with a stop-loss of Rs 222 on a closing basis for a target of Rs 260-265 in the short to medium-term.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Ajanta Pharma Ltd at Rs 1,512 in issue no. 40 (dated July 27, 2020). Post our recommendation, the stock has been witnessing a consolidation. The stock is still trading above the 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 1,425 on a closing basis, as the stock is likely to move higher from the current levels.