Technicals Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : During the last five trading sessions, Nifty has moved in the range of 614 points. It did not sustain the first three days of positive sentiment and lost 232.95 points in the last five trading sessions. 

In March series, it has lost 772.5 points or 5.11 per cent. It is forming lower highs & lower lows during the last one month, which is a bearish sign. It filled the gap of February 2 and closed just below it, which is yet another bearish signal. Earlier on March 18 also, it tested the gap area but failed to close below and bounced back sharply.

Nifty now has tested the 61.8 retracement level (14,297) of the Budget rally on Thursday. A weekly close below this would give a confirmation for double top pattern breakdown. On a monthly chart, Nifty is forming a shooting star candle. Interestingly, in January also, it had formed a shooting star but failed to get a confirmation. In February also, it had formed a long upper wick candle, which resembles a shooting star. These back-to-back bearish patterns at the lifetime high are signalling market tops.

There are 16 out of 21 market tops formed in the January-March quarter. This time too, the recent high of 15,432 could be an intermediate top. Month-till-date, Nifty has moved within the February month range. It failed to make a new high during the month. On the weekly chart, it is closing at the lowest point. It closed at the lowest level after January 25. Interestingly, the 50-DMA started trending down on Wednesday. The RSI is below 40 and enters the bearish zone. Nifty is trading 3.58 per cent below the 20-DMA. The rising ADX (21.92) indicates a strengthening bearish trend. As Nifty is trading below two short to medium-term averages, it is better to avoid fresh long positions and take profits off the table. As long as it trades below the 50-DMA, the downside targets are placed at 13,990-943. Nifty is likely to take a rest at this level before taking another trending move.

NIFTY DERIVATIVES: Nifty Futures lost 722 points or 4.76 per cent in March series. It closed at the lowest point of the month. It traded in the range of 1,113.75 points during the month. The rollovers stood at 74.03 per cent below the three-month and six-month average. The three-month average rollover is at 77.16 while the six-month rollover average is at 76.37. The put-call ratio (PCR) for the next weekly series is at 0.73 while the monthly PCR is at 1.62. India VIX rose 20.08 to 22.69 during the last five days, and it is also at a two-week high. This indicates more volatility in the near future. A move above 25 will have a very serious downside implication on the index.

For the next weekly series, the total call open interest is at 2,68,356, and the put open interest is at 1,95,948. For the monthly expiry, the total call open interest is at 1,86,226, and put open interest is at 3,00,191. For the next week, 15,000 and 16,000 strike calls have the highest open interest of 29,833 and 28,899, respectively. On the put side, 14,000 strike has the highest open interest of 27,990. The 14,500 strike has 12,191 OI, and 14,300 and 14,400 strikes have 12,334 and 11,337 OI, respectively. Expect 14,500 to act as a resistance, and 14,000 as support. Almost all the strikes from 13,950 to 14,650 on the call side have seen selling or short build-up. The 14,550-600-650 strikes put have seen a short covering. And from 14,500 to 13,950 strike put, a long build-up took place. Friday's closing is important for the next week's move. The weekly PCR shows that the downside is limited. Like last week, this week too, there could be a bounce on Monday because of short covering.

TECHNICAL RECOMMENDATION

STOCK STRATEGY

APOLLO PIPES LIMITED ......... BUY ............ CMP Rs 900.05

BSE Code : 531761
Target 1 : Rs 1,010
Target 2 : Rs 1,060
Stoploss : Rs 800 (CLS)

✓Current Observation: Apollo Pipes Limited is one of the top ten PVC pipe manufacturing companies in India. The company, which has four plants, also manufactures high-density polyethylene pipes (HDPE). Its products cater to the requirements of agriculture, water management, oil & gas, telecom ducting, and construction segments. It has a diversified mix of over 1,000 products. The company has a proven track record of expertise in complex projects of execution. Apollo Pipes Ltd is planning to expand its operations across India. It has a strong presence in north India and is gradually expanding to south India by establishing plants in Bengaluru (Karnataka) and Raipur (Chhattisgarh) to tap new markets. It had registered a 28 per cent YoY growth in revenue last quarter while its EBITDA improved to 20 per cent. Meanwhile, its net profit is up by 145 per cent.
✓Technically, the stock is trading near its lifetime high, which was recorded last week. It is trading at the new highs and is in a strong technical setup. The stock is trading above the 10, 30 & 40 weekly averages, and all of them are trending up. The stock is above the 50-weekly average while the 20 period RSI is above the 70 zone. The weekly MACD histogram shows a bullish momentum. The ADX (57.89) is above the +DMI while -DMI is showing a strong trend strength.
✓Currently, the 50-DMA is at Rs 741, which will act as strong support. The minor swing low is at Rs 800 and in the shortterm, this too will act as a support.
✓Considering the above factors, we recommend buying this stock with a stop-loss of Rs 800 on a closing basis for a target of Rs 1,010-Rs 1,060 in the short to medium-term.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Gland Pharma Ltd at Rs 2,470.60 in issue no. 22 (dated March 22, 2021). Post our recommendation, the stock marked a high of Rs 2,565 and thereafter, slid into consolidation along with a low volume. Currently, it is hovering around the 20-day EMA level. However, we can expect to see smart upmoves if it closes above the level of Rs 2,510. We would advise our readers to hold this stock with a stop-loss of Rs 2,310 on a closing basis, as the stock is likely to move higher from the current levels.