Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty took a roller coaster ride as it swung in both the direction before registering gains of 0.88 per cent from last Thursday close to this Thursday. In the last five trading sessions, Nifty has formed only one bullish candle, two bearish candles, and two indecisive candles.
On Thursday, Nifty formed a second consecutive indecisive candle and if we closely observe this pattern, we would see a formation of NR4 bar, which indicates that the current bar range is narrowest in the four bars. This pattern indicates a contraction in volatility and it is usually followed by a high volatility phase.
The strong bounce back, seen from its important longterm moving average i.e. 200-DMA, is now resisting around the rising wedge support line. The level of 11,220-11,260 is a strong hurdle for the index in the near term and as long as Nifty is not able to cross this resistance; the move on the upside is limited. Only a sustainable move above the level of 11,220-11,260, would result in a fresh momentum.
On the downside, the 20-DMA, which is placed around 11,013 levels, is likely to act as an immediate support level, while the major support is placed at 200-DMA. We expect the index to trade within the range of 10,850-11,250 in the near term. However, volatility is likely to be witnessed within this range.
As long as Nifty holds above 20-DMA, the trend will not decisively change in the favour of bear. While for the bullish momentum, Nifty needs to sustain above the 11,220-11,260 mark, which can then facilitate Nifty to eventually test the recent swing high of 11,341 levels.
NIFTY DERIVATIVES : Nifty Futures gained 118.60 points or 1.06 per cent since the last weekly expiry. On Thursday, Nifty Future of August contract saw 6.28 per cent open interest addition, and August futures current open interest was at 1,05,78,825. For the next weekly expiry, an open interest wise put-call ratio (PCR) is at 1.18. For the August monthly series, PCR is at 1.58.
For the next weekly expiry, the highest call open interest is at 12,000 strike with 11,35,725 OI. On the put side, 10,000 strike has 16,10,625 open interest, which is the highest. The highest addition in open interest was seen at 12,000 call of the next weekly expiry with 6,82,575 OI and on the put side, 11,000 put has seen the highest addition in open interest with 7,59,675 OI. For the next weekly expiry, the total call open interest is 1,19,49,000 and the put open interest is 1,41,46,125.
For the August monthly series, the highest call open interest is at 11,500 strikes with 21,93,150 OI, followed by 12,000 strikes with 18,76,050 OI. On the put side, the highest put open interest is at 11,000 strikes with 32,20,875 OI. The current derivative data suggest that the Max Pain is at 11,100 for the monthly expiry.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
AEGIS LOGISTICS LTD. ...................... BUY ........................ CMP Rs 213.30
BSE Code ...... 500003 | Target 1 .... Rs 230 | Target 2 .... Rs 235 | Stoploss.... Rs 195
✓ Current Observation: Aegis Logistics Limited is a holding company, which is engaged in providing logistics and supply chain services to the oil, gas, and chemical industries. The company is engaged in the sale of liquefied petroleum gas (LPG), wholesale of solid, liquid and gaseous fuels and related products as well as storage and warehousing of products, such as general merchandise warehouses and warehousing of furniture, automobiles, gas and oil, chemicals and textiles.
✓ Technically, the stock has formed a reversal bullish pin bar candle as on March 27, 2020, and initiated its northward move.
✓ Currently, the stock has given a downward sloping trendline breakout, formed by connecting swing highs from June 2020. This breakout is confirmed by robust volume.
✓ There is a ‘golden crossover’ observed on the stock as the 50-DMA recently crossed above its 200-DMA, which is a positive sign. The leading indicator, RSI, is in a rising trajectory in both the weekly and daily timeframe. The trend strength indicator, average directional index (ADX), is at 37.16, which indicates the strength. The +DI is much above the -DI. This structure is indicative of the bullish strength in the stock.
✓ Moreover, the other volume-based indicators like OBV and Money Flow Index (MFI) are also very strong.
✓ Hence, we recommend buying this stock for a target price of Rs 230, followed by Rs 235, with a stop-loss at Rs 195 level on a closing basis.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Huhtamaki PPL Ltd at Rs 241.20 in issue no. 41 (dated August 3, 2020). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of around Rs 259.50. We had given a ‘book profit’ message at the level of Rs 249.90 through our SMS service on August 3, 2020. Thus, investors who had taken positions, according to this strategy, would have made a decent profit.