Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : After witnessing a breakout of the consolidation range on Tuesday, Nifty extended its winning streak on Wednesday and registered a fresh swing high. Also, for the first time after February 27, 2020, it managed to close above the 11,400 mark. The credibility of the breakout of the consolidation range was suspicious in nature as the follow-through action was not convincing. Moreover, the volumes were not encouraging.
What we saw today was not at all surprising as we have already mentioned that the breakout was suspicious in nature and as a result, Nifty opened with a gap-down on Thursday and formed a Doji candle as the price closed near the opening level. With this, once again, Nifty has been pushed back into the earlier consolidation range. One of the key observations during Thursday’s session for the bears is that after opening the gap session with a gap down, Nifty attempted to move higher but throughout the day, it kept resisting around the 20-hour moving average. From the bulls’ perspective, the key takeaway from Thursday's session was that the bulls managed to defend the low of the bullish range breakout candle.
Hence, going ahead, on the upside, the immediate resistance is at 11,370, followed by 11,400. As long as Nifty stays below this level, do not create any aggressive long positions. On the other hand, the range of 11,200-11,250 is likely to act as immediate support for the index. A close below this level would open the gates for a further down move towards the level of 11,000-10,970. Overall, the trend remains in the favour of bulls but with the recent price action, it suggests that the bears have put the foot in the door and the next level, which would be significant to watch out, is 11,200.
NIFTY DERIVATIVES : Nifty Futures lost 23.85 points or 0.21 per cent since the last weekly expiry. In the last five trading sessions, Nifty Futures has added two distribution days as the index fell more than 0.2 per cent from the previous day’s close along with relatively higher volume.
For August monthly series, open interest wise put-call ratio (PCR) is at 1.26. For August monthly expiry, the highest call open interest is at 11,500 strike with 31,17,075 OI, followed by 11,300 strike with 22,71,900 OI. On the put side, 11,000 strike has 39,20,925 open interest, which is the highest. The highest change is open interest was seen at 11,300 call of August monthly expiry with 10,00,800 OI and on the put side, 10,000 put has seen the highest change is open interest with 6,06,375 OI. The total call open interest for August monthly series is 2,76,51,000 and the put open interest is 3,47,22,375. The current derivative data suggest that the Max Pain is at 11,300 for the monthly expiry.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
GNFC ..................................... BUY .............................. CMP Rs 182.80
BSE Code ...... 500670 T arget 1 .... Rs 197 | Target 2 .... Rs 203 | Stoploss.... Rs 170
✓ Current Observation: Gujarat Narmada Valley Fertilizers & Chemicals Limited is engaged in operating businesses of industrial chemicals, fertilisers and information technology (IT) products space. The company is engaged in manufacturing and selling various fertilisers, such as urea and ammonium nitro phosphate under the brand name of ‘Narmada’.
✓ From the low of Rs 95.55, which was registered on March 25, 2020, the stock has maintained its rhythm of higher highs and higher lows. In this process, it has surpassed the resistance one after the other in the form of 200-DMA and the 61.8 per cent retracement level of its prior downward move.
✓ On Wednesday, the 50-DMA crossed over the 200-DMA and it was termed as the 'golden crossover', which is a long-term bullish signal. Talking about the indicators, the RSI in a rising trajectory in both the weekly and the daily timeframe. The MACD is above the zero line and signal line and the MACD histogram suggests bullish momentum. And most importantly, the MACD line crossed the prior swing highs.
✓ The trend strength indicator, average directional index (ADX), is at 35.35, which indicates strength. The +DI is much above the -DI. This structure is indicative of bullish strength in the stock.
✓ Considering the above factors, we recommend buying this stock with a stop-loss of Rs 170 on a closing basis for a target of Rs 197-Rs 203 in the short to medium-term.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Dynemic Products Ltd at Rs 221.75 in issue no. 43 (dated August 17, 2020). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of around Rs 228.90. However, it did not sustain at higher levels and slipped below the stop-loss level. We recommend our readers to exit with a loss. We exited the stock at Rs 208 on August 17, 2020.