Technicals Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : Nifty snapped its seven-session winning streak as the market participants preferred to take profits off the table after a breath-taking rally in the index. Nifty began the day with a gap down and soon, it slipped lower and filled Wednesday’s session opening gap. On the downside, Nifty took support around the 5-EMA and in the process, recovered almost 80 points from the day’s low.

This smart recovery from the lower levels aided by the strong performance of Nifty FMCG index, lend a hand to the indices to close where it had opened and with this, the index formed a Dragonfly Doji-like candlestick pattern. However, the broader markets relatively underperformed Nifty as both Nifty Mid-cap and Small-cap lost 0.83 per cent and 0.53 per cent, respectively. As a result, the advance-decline ratio was in the favour of the decliners.

Technically, Nifty has breached its sequence of higher high & higher low for the first time from the low of 12,790. Though it had slipped below the low of the prior bar on an intraday basis yet on a closing basis, it did not. Also, the closing is seen around the top quadrant of the day, which reaffirms that the bulls have just taken a pause and it’s routine profit-taking in the markets. Also, the fear gauge, India VIX dropped 1 per cent, which indicates that there is no panic in the market.

Going forward, the level of 13,370-13,400 is a crucial support level for the index as it is the confluence of 5-EMA (13,397), 23.6 retracement levels and the rising trendline formed by connecting lows of November 26 and December 2 as a close below this move could open gates for a further correction towards the levels of 13,260 and 13,150.

In the coming sessions, we could see a sideways action and during this sideways action, the level of 13,370-13,400 is likely to act as immediate support. On the upside, the level of 13,550 is likely to act as a resistance level. Overall, we expect Nifty to enter into a time consolidation phase, where the range for the index would be 13,260 on the downside and on the upside, the level of 13,550 would act as a stiff resistance.

NIFTY DERIVATIVES: Nifty Futures has gained 329.15 points or 2.49 per cent since the last weekly expiry. On Thursday, Nifty Futures has witnessed a distribution day as the index fell more than 0.2 per cent from its previous day’s close along with a relatively higher volume.

For the next weekly expiry, the open interest wise put-call ratio (PCR) is at 0.97. For the December monthly series, PCR is at 1.88. For the next weekly expiry, the highest call open interest is at 14,000 strikes with 17,34,450 OI, followed by 13,500 strikes with 14,64,750 OI. On the put side, 12,500 strike has 14,28,600 open interest, which is the highest. Today, the highest addition in open interest was seen at 14,000 calls of the next weekly expiry with 10,89,225 OI, and on the put side, 12,500 puts have seen the highest addition in the open interest with 9,47,475 OI. For the next weekly expiry, the total call open interest is 1,41,67,725 and the put open interest is 1,37,44,350.

For the December monthly series, the highest call open interest is at 13,000 strikes with 24,09,975 OI, followed by 13,500 strikes with 21,83,625 OI. On the put side, the highest put open interest is at 13,000 strikes with 37,17,225 OI. The current derivative data suggest that the Max Pain is at 13,200 for the monthly expiry.

TECHNICAL RECOMMENDATION 

STOCK STRATEGY 

SEAMEC LTD ............. BUY .......... CMP Rs 474.80​

BSE Code : 526807
Target 1: Rs 510
Target 2 : Rs 520
Stoploss : Rs 445 (CLS)

✓Current Observation:Seamec Ltd provides diving support vessel (DSV)-based diving services. The company is engaged in the offshore & shipping business. Its support services include marine, construction, and diving services to offshore oilfields in India & abroad.
✓Technically, the stock has formed a shooting star candlestick pattern as on the weekend of July 31, 2020, and thereafter, witnessed a correction. The correction is halted in between the 38.2 per cent and 50 per cent retracement level of its prior upward move (Rs 188.05-Rs 448.80), which coincides with the 100-week EMA level.
✓ Currently, the stock has given a flat base pattern breakout on the weekly timeframe. Further, since the last three weeks, volume was above the 50-week average volume, which is a sign of accumulation. The stock is meeting the criteria of Mark Minervini’s trend template. The current stock price is above both the 150-day (30-weeks) and 200-day (40-weeks) moving average price lines. Moreover, the 30 and 40-weekly averages are trending up and at the same time, they are in the desired sequence. Interestingly, the 14-period weekly RSI has given a downward sloping trendline breakout, which is a bullish sign. Martin Pring’s long-term KST set up has also given a buy signal. Moreover, the other volume-based indicators like OBV and Money Flow Index (MFI) are also very strong.
✓ Based on the above observations, we expect the stock to move higher from the current levels and test the levels of Rs 510, followed by Rs 520 in the short-term. The stop-loss can be maintained at Rs 445 level on a closing basis.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Polyplex Corporation Ltd at Rs 773 in issue no. 07 (dated December 07, 2020). Post our recommendation, the stock witnessed a consolidation along with low volume. The stock is trading above its short and long-term moving averages while other technical parameters of the stock still look promising. We would advise our readers to hold this stock with a stop-loss of Rs 720 on a closing basis as the stock is likely to move higher from its current levels.