Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Until this week, the headline index i.e. Nifty 50 had been demonstrating extreme volatility in almost all the sessions, seeing either a gap-up or a gap-down opening in the markets. It was a matter of concern that after opening with gaps on either side, Nifty used to show very little intraday movement. This made the life of retail investors quite tricky, to say the least, as profiting from these kinds of markets had its own difficulties.
However, things changed over the past few sessions. Volatility has significantly decreased while over the past one week, Nifty changed a little in the past couple of trading sessions. Over the past five sessions, the index declined 45.65 points despite a large trading range and has grossly underperformed its global peers. India VIX, the measure of volatility has declined 6.28 per cent this week.
As compared to Wednesday’s session, Nifty had a stable weekly options expiry day. The headline index closed with net gains of 142.05 points (0.81 per cent). There was a massive Put writing of over 7.60 million shares at the strike price of 17,600, which helped Nifty keep its head above this point and settle higher than this level.
Over the next five sessions, Nifty will have to navigate through a few of the important technical parameters. Through detailed pattern analysis of Nifty, this week was significant as it confirmed the confluence of two pattern support trend lines as important support by rebounding from there, as evident from the charts. After that rebounding, Nifty has also moved past the 50-DMA, which currently stands at 17,464.74. The most recent upmove has seen Nifty halting near two of its important DMAs i.e. the short-term 20-DMA as well as the 100-DMA, which is currently very close to each other at 17,610.45 and 17,643.01, respectively. This makes the zone of 17,600-17,650 a crucial resistance for Nifty on a closing basis over the coming days.
If we try and gauge the directional bias of Nifty over the coming week; two things stand out clear. First, there are very few chances of any significant downside taking place in the markets, and secondly, there are high chances that the markets may see either ranged consolidation or incremental upsides taking place. The coming days will see the levels of 17,680 and 17,895 acting as potential resistance points while supports exist at 17,600 & 17,380 levels. The price action of Nifty against the level of 17,600 will be crucial to watch out for. Any sustenance above this point for long will see Nifty inching higher.
NIFTY DERIVATIVES: Nifty February Futures ended with gains of 117 points, which saw some premiums getting squeezed. The index has halted its upmove just near the short-term 20-DMA and with 100-DMA just a notch above this, it would be important for Nifty to move past 17,650 and sustain above this point for an extension of the upmove.
From the derivatives’ standpoint, the Options data present an interesting picture. Even the next weekly expiry of February 17 shows the maximum Put OI at 17,600, which means that if Nifty is able to sustain for long above this level, it may have some more room on the upside. In other words, with the second-highest Call OI having its concentration at 18,000, any meaningful extension of the upmove may take Nifty close to this level. In the same breath, any significant violation of 17,600 on a closing basis will push and keep the markets under some more consolidation. The directional bias over the coming days is likely to remain neutral to positive. Nifty PCR, across all expiries, stands at 1.22. We can expect 17,600 acting as an inflection point with both Call and Put maximum OI getting concentrated at this level.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
SEAMEC LTD. .......... BUY ........CMP ₹ 1306.00
BSE Code : 526807
Target 1 : ₹1400
Target 2 : ₹1420
Stoploss : ₹ 1220 (CLS)
✓ Current Observation: Seamec Limited provides diving support vessel (DSV)-based diving services. The company operates multi-support vessels for providing support services, including marine, construction & diving services to offshore oilfields. With a market capitalisation of about Rs 3,200 crore, it is one of the most promising companies in its sector.
✓ The stock broke out from its downward sloping trendline on Wednesday with heavier volumes. It tested the breakout level the next day from which, it bounced back sharply and hit a fresh alltime high.
✓ The stock has surged nearly 25 per cent in just four trading sessions and thus, displays high bullish momentum. Such bullishness is supported by a rising volume, which is greater than the 30-day and 50-day average volume. The volumes have been on a rise since three trading sessions.
✓ The 14-period daily RSI has jumped in the super bullish territory while the MACD histogram is rising and is above the prior high. Moreover, the trend indicator ADX is rising steeply. The +directional movement indicator is placed well above the -directional movement indicator. This structure pretty much summarises the bullish nature of the stock.
✓ Considering the ongoing bullish momentum, the stock is expected to test a short-term target of Rs 1,400, followed by Rs 1,420. Maintain a stop-loss at Rs 1,220.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Tata Power Company Ltd at Rs 252.85 in issue no. 16 (dated February 07, 2022). Post our recommendation, the stock moved higher as per our expectations and hit a high of Rs 257.85. However, bad market sentiments disturbed the stock’s performance as it fell about 6.73 per cent on Tuesday. The stock hit our defined stop-loss at Rs 240 and thus, we booked LOSS.