Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
The market consolidated in a small range since last Thursday. Nifty gained just 47.30 points in the last five trading sessions. Wednesday's move engulfed the previous four days’ move. It faced resistance at 127.6 retracement (15,785) of the prior fall. It tested for three days and declined.
After a series of hanging man candles, the bulls have finally sur-rendered on Wednesday with a one per cent drop. It has registered a distribution day after a long gap. After 234-point range, Nifty has formed an inside bar on Thursday. With Wednesday's decline, the technical price structure has been disturbed. We are suspecting the strength of the bulls, as with low volume, low momentum persists. On a weekly chart, the index is forming a Doji candle. Steve Nison's principle says a Doji at a lifetime needs a close below it for bearish confirmation. The index achieved all the short-term targets on Wednesday and is now, retracing. A decisive close below the 15,566 will lead to a significant weakness. However, On Thursday, Nifty gained 100 points while the momentum indicator i.e. the MACD histogram declined further down. Even the positive directional indicator i.e. the +DMI also declined. The Elder impulse system showed that the index is in a neutral stance.
As Nifty formed an inside bar, Wednesday's high of 15,800 and the low of 15,566 will act as resistance and support for the next few days. In any case, if Nifty closes above the level of 15,800, the weekly MACD may give a buy signal.
NIFTY DERIVATIVES:
Nifty Futures gained just 42.60 points since the last weekly expiry. With a wavering move on a high PCR, lower volume and low volatility resulted in a sudden sharp decline on Wednesday. Nifty put-call ratio (PCR) is at 1.64, which has not changed since the last week. However, the next week's PCR at 1.26 is on a little higher side. The open inter-est, up by 8.66 per cent on a 0.65 per cent gain on Thursday, indicates that the longs were build up after a big decline. As we are entering into the second week of June series, the rollovers were seen at 7.38 per cent. India VIX has declined by 4.71 per cent to 15 in last five trading sessions. During the last three days, it tested below 15 levels.
For the next weekly derivative series, the total call open interest is at 2,04,728 while the total put open interest is at 2,53,665. The maximum call open interest was seen at 16,000 strikes with 22,028 while at-the-money strike, 15,800 has an open interest of 20,964. The 16,100 strike has an OI of 15,712. On the Put side, the maximum open interest is at a deep-out-of-the-money strike of 14,800 with 25,074, followed by 15,700 strikes with 24,665. The 15,600 the strike also have a higher OI of 17,649. The 16,050 strikes witnessed a 350 per cent rise in the call open interest. On the put side, the 16,000 strikes saw 477 per cent rise in the OI. The Max Pain is at 15,700 for the next weekly expiry. Meanwhile, VWAP is at 15,737.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
ASTRAL LTD..................BUY ................... CMP Rs 1,970.55
BSE Code : 532830
Target 1 : Rs 2,134
Target 2 : Rs 2,170
Stoploss : Rs 1,880 (CLS)
Current Observation:
✓Astral Poly Technik manufactures a variety of plumbing and drainage pipes in India. The company caters to residential, commercial, industrial, and agriculture applications. It has a pan-India distribution network with six manufacturing units in Santej & Dholka (Gujarat), Hosur (Tamil Nadu), Ghiloth (Rajasthan), Sangli (Maharashtra), and Sitarganj (Uttarakhand). Recently, the company expanded its product range into water tanks, adhesives, and sealants. It established three adhesives manufacturing units in India, one in the UK while one in the USA. For the first time in India, the company launched multi-layer CPVC-AL-CPVC pipes under the Multi-Pro brand.
✓ Technically, the stock broke out of a nine-week stage-2 consolidation base with a higher volume. Its price relative strength is at 77 while its buyers’ demand shows the institutional interest in the stock. Institutional investors increased their stake in the company by 14.53 per cent during the last quarter. As the stock is trading at a new lifetime high, it is above all the short and long-term averages. Besides, all the moving averages are trending up. The weekly MACD has just given a buy signal. The ADX (46.7) is showing very strong trend strength. The positive directional indicator i.e. the +DMI is much above the –DMI while the RSI is in a bullish zone. The stock is also above the EMA envelop. The true strength indicator has also given a buy signal on the weekly chart. In short, the stock broke out of a consolidation. Accumulate this stock in the range of Rs 1,970-Rs 2,000. Maintain a stop-loss at Rs 1,880. The short-term target is placed at Rs 2,134 while the medium-term target is at Rs 2,170.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Dr Reddy’s Laboratories Ltd at Rs 5,286.10 in issue no. 33 (dated June 07, 2021). Post our recommendation, the stock has been witnessing a consolidation along with low volume. On the daily chart, the stock is oscillating in a narrow range since the last 19 trading ses-sions. Due to the narrow range, the Bollinger band has contract-ed, which is an early sign of the explosive move. Currently, the stock is trading above its short and long-term moving averages, which indicates that the trend is bullish. However, we can expect to see smart upmoves if it closes above the trendline resistance of Rs 5,350 level. We would advise our readers to hold this stock with a stop-loss of Rs 5,100 on a closing basis.