Technicals Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : Every now and then, people talk about how mainstream window shopping has switched to online shopping and how the gentlemen’s game i.e. Cricket, shifted its gears from Test Cricket to the fast & furious mode i.e. T-20 Cricket. With the passing time, even the stock market has changed and the year 2020, is a perfect testimony of this. To help you understand, we would highlight the recent correction, which we had witnessed in the index.

Right at the beginning of the week, Nifty logged its sharpest intraday fall since April 2020 amid the reports of a new variant of the novel Coronavirus in the UK. However, in the next three days, what we witnessed is that Nifty has retraced its entire fall. So, this showcases that during this year, the trend changes have been swift & quick. Usually, the magnitude of the fall, which we had witnessed on Monday, typically would have taken maybe a week or two but instead, over here, we saw this happening really quick. It ultimately proved out to be better than bad as it helped in removing the euphoria that was, build in the markets as the latter were scaling to new heights every day. Moreover, it gave an opportunity to those, who had missed the bus earlier. Along with this, we also saw the volatility gauge i.e., India VIX, jumping to 24 within no time and taking a U-turn from the earlier tops, which was placed around the zone of 24-26. 

Technically, Nifty still looks strong, and the swift correction turned out to be a blessing in disguise as Nifty, which was day-to-day moving far away from its 20-DMA, reverted to its mean during this period. And secondly, on November 25, we saw the formation of a big bearish bar while in the recent fall, Nifty took support exactly around the top of that big bearish bar. Thus, the earlier top turned out to be a major support. Going ahead, the level of 13,600 is a crucial support for the index and given that, since we are entering into the last week of December, history suggests that the FII desk is in a holiday mood and hence, we may see tepid inflows from their side as FII flow was one of the key factors helping the markets to reach new heights.

So, our advice for the trades would be to stick with quality names and look for stocks, which are breaking out of solid bases. At the same time, maintain a strict stop-loss for all the long positions.

Further, the second key driver of the rally i.e. Bank Nifty has also taken a backseat as it was seen underperforming Nifty in the last week or so. Overall, the view for the coming week would be to be with a bullish bias but also watch out for 13,600 levels on the downside as a breach of this would open gates for a further correction towards the levels of 13,340 and 13,150. Meanwhile, on the upside, the level of 13,800-13,880 would continue to act as a resistance zone.

NIFTY DERIVATIVES: During the last five trading sessions, Nifty Future traded in the range of 643.55 points and from the last weekly expiry, it has gained 4.7 points or 0.034 per cent. For December monthly series, the open interest wise put-call ratio (PCR) is at 1.49.

For December monthly expiry, the highest call open interest is at 14,000 strikes with 39,47,625 OI, followed by 14,500 strikes with 26,78,100 OI. On the put side, 13,000 strikes have 46,19,175 open interest, which is the highest. Today, the highest change in the open interest was seen at 14,000 calls of December monthly expiry with 9,57,975 OI while on the put side, 13,700 puts have seen the highest change in the open interest with 15,51,975 OI.

The total call open interest for December monthly series is 3,54,96,525 and the put open interest is 5,29,31,175. The current derivative data suggest that the Max Pain is at 13,500 for the monthly expiry.

TECHNICAL RECOMMENDATION

STOCK STRATEGY 

CHAMBAL FERTILISERS & CHEMICALS LTD .............. BUY .......... CMP Rs 230.25

BSE Code : 500085
Target 1 :  Rs 245
Target 2 :  Rs 252
Stoploss : Rs 212 (CLS)

✓Current Observation: Chambal Fertilisers & Chemicals Limited offers urea and diammonium phosphate (DAP). The company's segments include fertilisers, other Agri-inputs, own manufactured phosphoric acid segment along with shipping and software.
✓ The stock has given a downward sloping trendline breakout as on the weekend of November 14, 2020, and thereafter, witnessed nearly 35 per cent upward momentum in just five weeks. However, after registering a high of Rs 242.80, the stock has witnessed a throwback. The throwback is halted near the 20-day EMA level and thereafter, initiated its northward journey.
✓Currently, 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, 30 and 40-weekly averages are trending up and at the same time, they are in the desired sequence.
✓ The 14-period RSI on the daily timeframe is in bullish territory and it is on the verge of giving a positive crossover. Interestingly, in the recent throwback, the RSI has bounced from the zone of 62-63 mark, which indicates that the stock is in a super bullish range as per the RSI range shift rules. Moreover, the weekly MACD stays bullish as it is trading above its zero line and signal line. The histogram is suggesting a pickup in the upside momentum.
✓Considering the above factors, we recommend buying this stock with a stop-loss of Rs 212 on a closing basis for a target of Rs 245-Rs 252 in the short to medium-term.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of GHCL Ltd at Rs 202 in issue no. 09 (dated December 21, 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 189.30 on December 21, 2020.