Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
The domestic equity markets are in a strong bullish zone, outperforming the global markets. Today, on a weekly expiry day, Nifty advanced by 176.80 points or 0.97 per cent. Barring auto, all other sectoral indices have participated in today's rally. Almost every sec-tor index rose by over one per cent, showing the strength in the market's upmove.
We almost met our short-term target of Nifty i.e. 18,365, faster than expected! In the last five trading sessions, Nifty went up by 548 points or 3.08 per cent. This is one of the strongest bullish weekly candles in the current uptrend. The breakout of 13-day cup pattern breakout gave an impulsive move in the last few days. It opened with gap ups in the last two days and moved higher. A decline only below these two gaps will create some bearish signs. The supports moved much higher. On the daily chart, the first area support is at 18,197 while the second gap area support is at 18,009. On the weekly chart, Nifty has formed the most bullish candle, as the low & high of the week are almost equal to open and the close. The 20-DMA support is at 17,775. The benchmark index has moved higher by over five per cent since the current swing at 17,452. The daily MACD has given a fresh buy signal while the histogram suggests that a fresh bullish strength is a reality now! The RSI on the daily and weekly charts is above the zone of 75 and also, near the pre-vious high. Nifty will rally another one per cent before it consolidates once again. We can expect a decent consolidation after meeting the cup pattern breakout target, which is at 18,444. Now, aim for this target next week! However, stay cautious, as the aggressive profit may lead to a sharp decline.
NIFTY DERIVATIVES:
Nifty Futures gained 548.60 points or 3.08 per cent during the last five trading sessions. There are no negative closings in this period. Today, Nifty Futures went up by 181 points or one per cent, but the open interest declined by 1.12 per cent, which indicates that the long unwinding is happening at the higher levels. The volumes are still below the 20 and 50-day average. The put-call ratio (PCR) is at 1.63 per cent. PCR is consistently above the 1.55 zone all these days. The weekly PCR is at 1.30. The monthly at-the-money implied volatility is slightly lower at 12.84. The volatility index VIX has declined to 15.77 from 16.15 in the last five trading sessions.
For the next weekly expiry, the total call open interest is 3,70,649 while the total put open interest is 4,83,417. The highest call open interest is the deep-out-of-the-money strike of 19,000 with 37,021 OI, followed by the 18,500 strikes with 35,463 OI. The at-the-money strike 18,350 has an open interest of just 10,305. The 18,300 strike has an OI of 30,032. On the put side, the highest open interest is at 18,100 strikes with 37,714 OI, followed by 18,000 strikes with 36,227 OI. The 18,200 and 18,300 strikes also have a significantly higher open interest of 33,161 & 33,591. There is a huge call long build-up from 18,300 strikes to 18,750 strikes. The 18,750 strikes open interest has increased by 1,142 per cent. The short built-up was witnessed on the put side. The 18,700 strikes have seen a 7,673 per cent rise in the open interest. Max Pain for the next weekly expiry is at 18,300 while VWAP is at 18,303.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
MASTEK LTD. ...........BUY .......... CMP Rs 3225.15
BSE Code :523704
Target 1: Rs 3,430
Target 2 : Rs 3,500
Stoploss : Rs 3,050 (CLS)
Current Observation:
• Mastek Limited is an enterprise digital transformation specialist, which offers digital services. Its services include cloud-native and application development, digital commerce as well as application support and automation. It has a presence in UK, USA, East, Asia Pacific, and India. The company's recent acquisition of Evosys has enabled Mastek to provide end-to-end solutions and improve margins from 14 per cent to 21 per cent.
• Technically, the stock is trading at a new lifetime high. The recent six-week cup pattern breakout has met the short-term targets. The stock is well above all the key moving averages. It is 10 per cent above the 50-DMA and 61 per cent above the 200-DMA. The stock is meeting all the CANSLIM characteristics. Its relative price strength is good and strong at 86. Since July this year, the RSI is sustaining above the strong bullish zone. The weekly ADX (59.37) shows solid trend strength. The daily MACD is about to give a fresh buy signal. The 10, 30, and 40-weekly averages are trending higher and meeting Mark Minervini's trend template. The Elder impulse system has given a fresh buy signal. In short, the stock is in a strong uptrend.
• Buy this stock at the current price of Rs 3,225.15. Maintain a stop-loss at Rs 3,050. The short-term target is placed at Rs 3,430-Rs 3,500. Above this, continue with a trailing stop-loss.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Bhansali Engineering Polymers Ltd at Rs 206.90 in issue no. 51 (dated October 11, 2021). Post our recommendation, the stock moved higher in line with our expectations and went on to touch the level of around Rs 222.50. We had given a ‘book profit’ message at the level of Rs 216.60 via our SMS service on October 13, 2021. Thus, investors, who had taken positions according to this strategy, would have made a decent profit.