Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
In the last five trading sessions, Nifty gained about 352 points or 2.2 per cent amid participation from across the board. Interestingly, in the last couple of trading sessions, Nifty is seen crossing one barrier after another. Firstly, it crossed its 20-DMA, and then, it closed above the important psychological mark of 16,000 while on Thursday, it registered a breakout above the falling supply line joining the highs of the last three months thereby, signalling a reversal in the trend. Having said that, the road ahead is not going to be an easy one but why are we saying so?
The index has closed in close vicinity of 61.8 per cent retracement of the prior downswing. Usually, in any counter-trend rally, a move anywhere between 38 per cent and 62 per cent is quite normal. Secondly, the candle formation on Thursday was a small-bodied candle with a long lower shadow. Though the long lower shadow indicates buying demand from lower levels, this candle was formed at the downside gap area of June 13, which is a sign of exhaustion. Now the question arises, will it continue its upmove from here on?
Technically speaking, the opening on Friday and price action thereafter would be crucial to watch out for because the index has just managed to cross its 50-DMA. It has closed in the vicinity of the 61.8 per cent retracement level of the prior downswing; hence, going ahead,sustaining above 16,180 will turn out to be positive for the index.
Interestingly, the daily 14-period RSI is above 55. More importantly, the MACD line is moving above the signal line and the histogram is suggesting a pickup in momentum. The +DMI line has crossed over -DMI and the +DMI is on a rising trajectory.
Overall, we expect the index to consolidate in the coming trading sessions and during this consolidation phase, the level of 16,180 on the upside is going to act as a resistance level. Meanwhile, on the downside, the level of 16,000 is likely to act as an immediate support level. We expect the earnings season to dictate the further movement of the index in the weeks to come.
NIFTY DERIVATIVES:
Nifty futures gained 374 points or 2.4 per cent since the last weekly expiry. The gap-up opening did not attract much open interest or volume today. The open interest declined 1.31 per cent on a 0.89 per cent gaining day, shows some unwinding happening. The put-call ratio is at 1.21. The implied volatility has declined to 17.54 today from 22.21, a day before. This shows that some consolidation and sideways range are to come in the next few days. The Option premiums also declined. VIX has also declined to 19.20 from 21.25 last week.
For the next weekly expiry, the total call open interest is at 6,18,831 while on the Put side, the total open interest is at 7,51,593. The at-the-money strike of 16,200 call strikes has the highest open interest, followed by the deep-out-of-the-money strike of 17,000 with 49,850 OI. The 16,500 strikes also have a significantly high open interest of 45,710. Even the 16,300 strike has an open interest of 41,632. On the put side, the 15,900 strike has the highest open interest of 61,227, followed by 15,800 strikes with 48,817 OI. The 16,000 strike has an open interest of 48,351. The 16,000 to 16,500 strike calls witnessed long build-ups. The remaining strike calls saw short covering. The 16,150 strike has the highest increase with 603 per cent open interest. On the put side, all the strikes saw short build-ups. The 16,050 and 16,100 strikes witnessed the highest increase of 2,269 per cent and 1,014 per cent, respectively. The derivative data shows that Max Pain for the next weekly expiry stands at 16,100.
TECHNICAL RECOMMENDATION
TUBE INVESTMENTS OF INDIA LTD.......................BUY...................... CMP Rs2008.85
BSE Code ...... 540762
Target 1 .... Rs2,260
Target 2 .... Rs2,300
Stoploss ...Rs1,900 (CLS)
Current Observation:
✓Tube Investments of India Limited is an India-based mobility focussed manufacturing company.
✓ The stock has broken out of a 26-week consolidation with above-average volume. As it is trading above the prior pivot level, it is also trading above all the key moving averages. It is 21 per cent above the 50-DMA and 23 per cent above the 200-DMA. The short and long-term moving averages are in the uptrend in ascending order. It is also meeting Daryl Guppy’s multiple moving averages (GMMA) setup.
✓ The weekly RSI is in a strong bullish zone while the MACD has given a fresh buy signal. The +DMI is above the -DMI and ADX. The Elder impulse system has formed two strong bullish bars. It has cleared the Anchored VWAP resistance. The KST and the TSI indicators are giving strong bullish signals.
✓ From the perspective of O'Neil methodology (CANSLIM), the stock has an EPS rank of 95, which is a great score, indicating consistency in earnings. The relative price strength (RS) rating of 83, which is good, indicates the outperformance as compared to other stocks. The buyer demand at A is evident from the recent demand for the stock. The number of the institution has increased to 236 in the last quarter. The master score of B is close to being the best. Overall, the stock has great fundamentals and technical strength to stay in momentum. Buy this stock at the current levels i.e. Rs 2,016 with a stop-loss of Rs 1,900. The short to medium-term target is placed at Rs 2,260-Rs 2,300.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Jamna Auto Industries Ltd at Rs 122.10 in issue no. 37 (dated June 30, 2022). As per our expectations, the stock traded firmly above our suggested buying price and remained strong throughout the week. We had given a ‘Book Profit’ message at the level of Rs 135.50 via our SMS service on July 4, 2022, and also, updated the same on our ‘Flash News’ App. Thus, traders, who had taken positions according to this strategy, would have made a decent profit.