Technicals Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY :In this truncated week, Nifty consolidated further. In the four days of trading, Nifty moved higher by 542 points or 3.79 per cent. The first two days of big upmove and the last two days of consolidating within Tuesday's price action have not given any clues for the near-term trend. It tested the previous week's high on Tuesday but failed to close above it. It has also formed parallel highs at 14,875-80 levels. The price structure on a 75-minute chart resembles an inverted head & shoulders and the 14,875-80-parallel line as a neckline. In any case, a close above this neckline is a positive sign for the market.

Though the market maintained a positive momentum most of the time, the advance-decline ratio is not so encouraging. Nifty formed a perfect Doji candle on the monthly candle of March. Before this, two long upper shadow candles, which resemble a bearish candlestick pattern and a shooting star, are indicating profit booking at the higher levels.

Nifty is oscillating around the 50-DMA for the last 11 trading sessions. This is the first time since March lows it indecisive to move above to its 50-DMA. After two days of attempt, it was finally able to close above the 20-DMA, which is a positive sign. During the last financial year, Nifty rose by 6,092 points or 70.87 per cent. Since the last March, none of the monthly candles closed below the prior bar's low. As Nifty is consolidating within the 1,000-point range between 15,431-14,469, it is important to move out of this range for a decisive trending move. In any case, if it closes below the recent low of 14,264 on a weekly closing basis, it will confirm that the 15,431 is an interme-diate top. However, a move above the 15,100 – 15,336 would indicate the sign of resumption of an uptrend.

NIFTY DERIVATIVES:
Nifty Futures gained 601.95 points or 4.2 per cent in the last four trading sessions. It closed above the previous week's high. Today's volumes are lower than the previous three weekly expiries. The rise of 1.2 per cent in the price and 2.65 per cent decline in the open interest shows that a long liquidation happened in the market. The rollovers stood at 7.86 per cent. For the next week, the put-call ratio (PCR) is at 0.84. And for the monthly series, the PCR is 1.66 per cent. The cur-rent monthly PCR is at the highest level since March 9. It is signalling that the swing high is almost in place. On March 3, when the PCR touched 1.81, the market showed resilience to move further high. For the next week, it is very important to sustain the positive momentum to continue the upside move. 

For next weekly expiry, the total call open interest is at 2,36,220 while the put open interest is at 1,98,842. The highest call open interest is at 16,000 strikes with 32283, followed by 15,000 strikes with 25,401. There is a maximum increase in the open interest seen at 15,150 strikes with a 294.97 per cent rise. There is a short-covering in 14,750 strikes and short built-up in 15,150 strikes. On the put side, the maximum open interest were seen at 14,700 strikes with 22,254, followed by 14,000 strikes with 18,620. Interestingly, Puts have seen the short built-up from 14,550 to 15,100 strikes. The 14,900 put strikes witnessed the maximum rise of 830 per cent in the open interest. The volatility index, India VIX cooled off further to 19.9875, down by 3.18 per cent. Meanwhile, the Max Pain is at 14,800 for the next week. For the next week, 15,000 and 14,700 will act as resistance and support, respectively.

TECHNICAL RECOMMENDATION

STOCK STRATEGY

SUNDRAM FASTENERS LTD​ ......... BUY ............ CMP Rs 799.00

BSE Code : 500403
Target 1 : Rs 880
Target 2 : Rs910
Stoploss : Rs 740 (CLS)

✓Current Observation:Sundram Fasteners is a TVS Group company, engaged in automotive component manufacturing. The company is growing at a rapid pace than the industry. This is the reason its group rank is at 43. It derives its revenue majorly from the domestic market, with 65 per cent from OEM and 10 per cent from the aftermarket. The remaining 25 per cent comes from exports. The company is focussing on the electric vehicle segment to garner a major market share. It has developed few components in hot and warm forgings. The company is achieving double-digit earnings growth for the last two quarters. Its return on equity is at 16 per cent while the earning stability is good at 31. The institutions have increased their stake in the company by 2.27 per cent during the last quarter.
✓Technically, the stock is trading at a lifetime high. It came out of a minor 11-day cup formation. Its relative price strength is as good as 88 and making a new high. The stock meets Mark Minervini's trend template rules, it is trading above the 10, 30, and 40 weekly averages, and all of them are trending. The stock is trading 13.01 per cent above the 10-weekly average.
✓The weekly ADX (54.63) shows the trend strength, and it is above the +DMI and –DMI, which is a very positive sign. The MACD histogram shows an increased bullish momentum. The 20-period RSI is at 78 and indicates that further strength is possible. Elder impulse system has given a buy signal and Pring's KST also shows bullishness.
✓The stock has retraced 100 per cent of the prior swings, which was registered three weeks ago. Considering the above factors, we recommend buying this stock with a stop-loss of Rs 740 on a closing basis for a target of Rs 880-Rs 910 in the short to medium-term.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Apollo Pipes Ltd at Rs 900.05 in issue no. 23 (dated March 29, 2021). Post our recommendation, the stock moved higher in line with our expectation and went onto touch the level of around Rs 1,035.95. We had given a ‘book profit’ message at the level of Rs 971.15 via our SMS service on March 30, 2021. Thus, investors, who had taken positions, according to this strategy, would have made a decent profit.