Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY :

The domestic market is finally showing signs of weakness in the overheated market. After registering a fresh lifetime high on Monday & Tuesday, an aggressive profit booking dragged the market in the last three days. On Thursday, Nifty closed at 18,178.10 with a decline of 88.50 points. With the last hour’s short covering or a sharp surge in the banks, Nifty recovered 130.10 points from the day's low. Meanwhile, Nifty Bank surged 772.35 points in the last 90 minutes of trading.

Nifty is forming a dark cloud cover on the weekly chart. It declined 160.45 points or 0.88 per cent since the last weekly expiry or in the last five trading sessions. The benchmark index has retraced more than 38.2 per cent of the recent upswing from October 1. The 50 per cent retracement level is at 18,028. We are cautioning about the overbought condition and the overextension of the uptrend. By declining almost three per cent from its lifetime high, Nifty has given a weaker signal for the first time. As the prior retracements were limited to less than 61.8 per cent, we expect Nifty to consolidate above 17,893. The 20-DMA is at the 17,938 level. This 17,893-938 zone will act as a strong support zone for now. In the history of the Indian stock market, the October-December quarter is found to be quite bullish. Nifty had made a major top in this quarter only in the last 20 years. As the technical analysis is based on the philosophy of 'history repeats itself', the probability of consolidation is higher before it gives a clear trend signal, which is either the continuation of the current uptrend or a reversal.

During the last 18 months, Nifty has not closed below the prior month's low. And on four occasions i.e. during September 2020, January 2021, March 2021, and April 2021, Nifty closed below the opening level. The latest swing, low or monthly low, is placed at 17,452. The previous week's low was at 17,839. These are the import-ant levels for the long-term trend reversal. For the near future, Nifty may take support at 20-DMA of 17,938 or a 50 per cent retracement level of 18,028. As the Festival of Lights i.e. Diwali is just around the corner, we cannot expect a decline more than this. On the upside, the immediate resistances are placed at 18,260, 18,326, and 18,392 levels. The trend will resume to fresh highs only in case of a new high. The next two weekly closings along with October monthly closing will give us further clues about the market's direction.

NIFTY DERIVATIVES:
Nifty Futures declined 114.50 points or 0.62 per cent in the last four trading sessions or since the last weekly expiry. For the last three days, the volumes are above average, indicating the distribution at the new highs. As we are entering into the monthly expiry week, the roll-overs are picking up. Currently, the rollovers are at 57.98 per cent. The put-call ratio (PCR) is at 0.76, which shows the limited downside for the next five trading sessions. The next month's PCR is at 1.36. The at-the-money strike implied volatility (IV) is at 14.67, which is higher than the previous week. India VIX shot up by 14.38 per cent in the last four trading sessions and settled above 18.03. 

For the monthly expiry, the total call open interest is at 10,97,320, and the total put open interest is at 8,38,912. The maximum call open interest was seen at 18,500 strikes with 84,876 OI, followed by an at-the-money strike of 84,135 OI. The 18,400 strike also has a signifi-cant open interest of 81,120. On the put side, the at-the-money strike 18,200 has the highest open interest of 71,228, followed by deep-out-of-the-money strike 17,500 with an OI of 52,984. The 18,000 strike has an OI of 51,954. A huge call selling was witnessed from 17,950 to 18,550 strikes. The 18,150 strikes saw a 1,040 per cent increase in the open interest. On the put side, short-covering was witnessed from 18,250 to 18,550 strikes while the shorts were built up from 18,200 to 17,850 strikes. Max Pain is at 18,200, and the VWAP is at 18,194. 

TECHNICAL RECOMMENDATION

STOCK STRATEGY

TCI EXPRESS LTD. ...........BUY .......... CMP Rs 1,641.80

BSE Code :540212
Target 1: Rs 1,780
Target 2 : Rs 1,810
Stoploss : Rs 1,550 (CLS)

Current Observation:
•TCI Express is India’s leading logistic company, which offers customised solutions to express delivery. The company has been growing rapidly and is expanding its distribution network locally, with its 800 offices (currently) covering more than 40,000 locations. TCI Express is well-equipped to offer time-definite solutions to 704 out of 712 districts in India. Its wide spectrum of services comprises surface, domestic & international air, e-commerce, priority, and reverse express services.
• The company has posted an extraordinary growth in its net profit during Q1FY22. The net profit grew 2,483.8 per cent to Rs 23.8 crore. The total income went up by 148.9 per cent to Rs 224.6 crore. Its EBITDA stood at Rs 33.7 crore, registering a 15 per cent jump. Its EPS is at Rs 6.19, up by 2,481.7 per cent. The return on equity (RoE) is at 23 per cent.
• Technically, the stock is near the prior pivot and forming a 13 week Stage-2 cup pattern. The volume recorded is above average in the current week. The stock is comfortably placed above its key moving averages and is 9.89 per cent above the 50-DMA as well as 35 per cent above the 200-DMA. Its relative price strength is fair at 65. The weekly MACD has given a fresh buy signal. The RSI is in a strong bullish zone. The ADX (38.24) shows solid trend strength. The long lower shadow of the current weekly candle shows strong buying support at the lower level. The 10-weekly average is working as strong support. It is above the anchored VWAP resistance. In short, the stock is about to break out of a bullish cup. A close above Rs 1,675 is positive for the stock. The short-term target is placed at Rs 1,780 while the medium-term target is at Rs 1,810. Maintain a stop-loss at Rs 1,550. 

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Mastek Ltd at Rs 3,225.15 in issue no. 52 (dated October 18, 2021). Post our recommendation, the stock did not sustain at higher levels as selling pressure emerged in the market and it slipped below the stop-loss level. We recommend our readers to exit with a loss. We exited the stock at Rs 2,950.75 on October 20, 2021.