Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
The equity benchmark indices made a new closing high with broad-er market participation.
Nifty closed at 16,364.40 with gains of 82.15 points. Barring Nifty Pharma index, all the other sectoral and thematic indices ended with pos-itive gains.
Nifty formed a strong bullish candle after five days of indecisive and sideways action. It gained 69.80 points in the last five trading sessions. It closed at a five-day high; in fact, by closing above 16,369, it has broken out of a five-day base. During the last five days, it experienced higher vola-tility with negative market breadth.
However, today, the breadth is extremely positive across the broader indices. Institutional participation has improved while every low is attracting buying support. With the five-day consolidation, the support levels moved further high. As Nifty registered a closing high, the positive bias will continue as long as it closes below the prior day low. Wednesday's low of 15,162, which is the low of the last five-day consolidation, will be a key support for now. The RSI closed above the prior swing high, and the MACD histogram improved with today's move.
If Nifty sustains above the levels of 16,286, the immediate tar-gets would be placed at 16,485 and 16,685. Keep a trailing stop-loss according to the risk level and continue the long positions.
NIFTY DERIVATIVES:
Nifty Futures consolidated since the last weekly expiry and went up by just 64.35 points in the last five trading sessions. The lowest volumes were recorded since July 16, 2020. After an impulsive move, it mostly traded in just 187 points range.
The put-call ratio (PCR) has reached the highest level in recent time to 1.83. Even the next weekly expiry PCR is at an extreme high i.e. at 1.42, which indicates a probable swing high. During the last five days, Nifty Futures formed all small body candles showing indecision about moving higher or lower. India VIX declined by 3.88 per cent to 12.3725 from 12.8725. The at-the-money implied volatility once declined to a single-digit i.e. 9.97. This is the reason for lower option premiums.
The total call open interest is at 3,34,538 while the total put open interest is at 4,76,147. The out-of-the-money strike, 16,500 strike has the highest call open interest with 37,289, followed by 16,300 strike with 35,997 OI. The 16,400 and 16,600 strikes also have a signifi-cantly higher open interest. On the put side, the 16,300 strike has an open interest of 60,432, followed by 16,200 strikes with 41,929 OI. Deep-in-the-money strike 15,600 has an OI of 38,997. There is not much OI in ITM strikes. All the put strikes from 16,000 to 16,800 strikes witnessed short build-up. On the call side, 16,200 and 16,250 have seen short-covering taking place. And 16,300 to 16,650 strikes have seen a long build-up. Max Pain for the next weekly expiry is at 16,300 while VWAP is at 16,334.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
KEI INDUSTRIES. ..........BUY .......... CMP Rs752.00
BSE Code : 517569
Target 1: Rs 820
Target 2 : Rs 845
Stoploss : Rs 705 (CLS)
• Current Observation: KEI Industries is a wire & cable solutions company, having a presence in 45 countries. It has a strong network with over 5,000 channel partners. It has 21 warehouses across the country. During Q1FY21, the company posted 36.52 per cent growth in revenue. The quarterly net profit increased to Rs 67.10 crore from Rs 36.23 crore, up by 85.23 per cent. EBITDA stands at Rs 116.48 crore, up by 44.03 per cent. EPS has increased from Rs 4.05 to Rs 7.47. Its return on equity is good at 15 per cent.
• Technically, the stock is in a six-week tight flat base. It took support at a 10-weekly average. The stock is above all the long and short-term moving averages. It is 4.25 per cent above the 20-DMA and 6.10 per cent above the 50-DMA. All the moving averages are trending up. The daily MACD has given a fresh buy signal. The RSI is also forming a base (squeeze) and is in the bullish zone. The directional movement indicators are showing a possible impulse move soon. The weekly ADX (50.65) is showing a solid strength in the trend. Its relative price strength is fair at 68. The stock is trading near the pivot.
• In short, the stock is in a clear uptrend and consolidates in a flat base. A move above Rs 765 is positive and it can test Rs 820 in the short-term while Rs 845 in the medium term. Maintain a stop-loss at Rs 705.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Piramal Enterprises Ltd at Rs 2,601.15 in issue no. 42 (dated August 09, 2021). Post our recommendation, the stock moved higher in line with our expectations and went onto touch the level of around Rs 2,858. We had given a ‘book profit’ message at the level of Rs 2,841.40 via our SMS service on August 09, 2021. Thus, investors, who had taken positions according to this strategy, would have made a decent profit.