Technicals Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : Today’s market crash proved the age-old saying of D-Street, ‘bulls walk up the stairs, bears jump out of the window’.

Nevertheless, on Thursday, Nifty witnessed a scary fall and recorded its biggest single-day fall in percentage terms after May 18. The mighty bears were so fierce that only three stocks of Nifty 50 index managed to close in green and that too with minuscule gains. Besides, all the sectoral indices ended deep in the red.

The fall was so severe in nature that Thursday’s big bearish candle had engulfed the previous five trading sessions’ candles along with cornering the bulls in such a manner that all the key short-term support was taken down in just a single bar.

Going ahead, the immediate support for the index is seen around the level of 11,610. In case, if Nifty does not hold this support, it’s likely that the bears would go on to test 20-DMA in the near term.

On the lower timeframe i.e. the 60-minutes, we had seen a breakout of a flag pattern on Wednesday; however, there was no follow-through buying, which resulted in a trap for the buyers. Further, there is a concept of walking the bands in the Bollinger Band. It helps us to know when the trend is strong. The thumb rule says that when the trend is strong, prices tend to hug the bands, and we are witnessing a similar trend in the lower timeframe as the price is walking with the band in the downtrend. Also, there is a formation of a double top pattern in the 60-minutes chart, and with Thursday’s ferocious falls; the index breached the neckline of the double top pattern.

Hence, it would be interesting to see whether the price manages to hold above the 11,610 levels in the coming sessions. If it does, then there are chances to see a pullback max towards the 50 per cent level of the big bearish candle of Thursday, which stands near about 11,850 levels.

Overall, the bulls have lost their advantage and it is the bears that are in the driving seat now, and hence, the market participants should keep a close eye on the support level of 11,610 as a breach of this support level would mean that the index may retest its 20-DMA.

NIFTY DERIVATIVES : Nifty Futures has lost 156.80 points or 1.32 per cent since the last weekly expiry. For the next weekly expiry, the open interest wise put-call ratio (PCR) is at 0.75. For October monthly series, PCR is at 1.36.

For the next weekly expiry, the highest call open interest is at 12,500 strikes with 26,53,125 OI, followed by 12,000 strikes with 23,87,175 OI. On the put side, 11,000 strike has 14,77,800 open interest, which is the highest. The highest addition in open interest was seen at 12,500 calls of the next weekly expiry with 22,03,275 OI and on the put side, 11,000 put has seen the highest addition in the open interest with 8,05,500 OI. For the next weekly expiry, the total call open interest is 1,78,91,325 and the put open interest is 1,34,37,600.

For October monthly series, the highest call open interest is at 12,500 strikes with 24,33,000 OI, followed by 12,000 strikes with 24,01,800 OI. On the put side, the highest put open interest is at 10,500 strikes with 34,00,725 OI. The current derivative data suggest that the Max Pain is at 11,700 for the monthly expiry.

TECHNICAL RECOMMENDATION

STOCK STRATEGY 

SIEMENS LIMITED ........................... BUY ................ CMP Rs 1,242.00

BSE Code - 500550
Target 1 - Rs 1,300
Target 2 - Rs 1,325
Stoploss -Rs 1,185

✓ Current Observation: Siemens Limited is a holding company engaged in the manufacturing of electric motors, generators, transformers, electricity distribution, and control apparatus along with, general-purpose machinery, electrical signaling, safety, or traffic-control equipment.
✓Considering the daily timeframe, the stock is trading in a rising channel since June 2020. After registering a high of Rs 1,299, the stock has witnessed a correction. The correction is halted near the lower trendline of the rising channel and coincides with the 50-day EMA level.
✓Further, on Wednesday, the stock has formed a bullish pin bar candlestick pattern. The long lower shadow of the candle clearly indicates the emergence of buying interest near the trendline support.
✓Currently, the stock is trading above its medium and long-term moving averages, i.e. the 50-day EMA, 100-day EMA, and 200-day EMA. The daily strength indicator, RSI has bounced after touching the level of 46 but it is trading below its 9-day average, indicating an absence of strength. The momentum oscillator stochastic is scaling up from the oversold region, indicating an upside momentum.
✓Based on the above observations, we expect the stock to move higher from the current levels and test the levels of Rs 1,300, followed by Rs 1,325 in the short-term. The stop-loss can be maintained at the level of Rs 1,185 on a closing basis.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Balrampur Chini Mills Ltd at Rs 160.30 in issue no. 51 (dated October 12, 2020). Post our recommendation, the stock did not sustain at higher levels as selling pressure emerged in the market and the stock slipped below the stop-loss level. We recommend our readers to exit with a loss. We exited the stock at Rs 149.95 on October 15, 2020.