Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
The benchmark index continued its rally for the third consecutive day with gains of 47.10 points. It reclaimed above the 17,500 level. The banks, IT, and realty indices were subdued today while the media & FMCG indices led the market. ITC became the major contributor to the index gains.
Nifty had formed a base at the zone of 16,891-985 and bounced around 3.8 per cent from the low. It registered gains of over 340 points in two successive sessions and closed exactly at the prior minor swing high of Wednesday. Though it formed a Doji candle today, it closed above the minor swing high. This seven-day base breakout will lead to a reversal of an intermediate downtrend. As it formed a Dragonfly Doji candle, the next day closing will be crucial for the breakout to sustain. A close above the Doji candles' close will continue the rally. Otherwise, the downtrend will resume. A Doji formation at the swing high needs a close above it to continue the current upmove. During this week, the daily ranges were increased by over 270 points.
On a 75-minute chart, the index reacted exactly from the count-er-trend resistance line. The first bar, which was a bearish engulfing at the resistance, has given a caution. Nifty failed to cross the first hour’s high and mostly traded within that range. Friday's closing is very important for the market trend as the index is giving contradicting price behavioural patterns. A close above the prior swing is positive and a Doji is indecisive. On Friday, the first hour’s closing is also quite significant. The daily close above 17,545 is positive and will test the levels of 17,664 and 17,904. In any case, if it closes below 17,489, it will be a negative sign for the market. Hence, it is wise to be with a light position size.
NIFTY DERIVATIVES:
Nifty Futures almost ended in flat to positive from the last weekly expiry close. It gained just 124.35 points or 0.71 per cent. The vol-umes are below average and declining. The last two days’ rally with low volume is not giving strong bullish signs. After a 556-point rally in just two consecutive sessions, Nifty Futures has paused its strong momentum, closing with gains of 43.35 points on a weekly expiry day. On such a sharp rally, the open interest has not increased much. On a weekly expiry day, the index futures opened with a gap-up and traded in the range of 152.65 points. On a 0.27 per cent gain, the open interest increased by 4.59 per cent, indicating the long build-up. The monthly put-call ratio (PCR) is constantly above 1.35 and is currently at 1.41.
For the next weekly expiry, the PCR is at 1.26. VIX has cooled off after hitting 23.82 during the last month. Today, it ended at 16.60. At-the-money implied volatility is at 14.66. For the next weekly expiry, the total call open interest is at 4,02,181 while the total put open interest is at 5,04,895. At-the-money strike, 17,500 calls have the maximum open interest of 42,720, followed by the out-of-the-money strike 18,500 strike with an open interest of 41,778. The 17,600 strikes also had an open interest of 25,968. On the put side, the 17,500 strike has an open interest of 40,848, followed by 17,200 strikes with 38,707 OI. The 17,300 strikes also have 36,379 open interest. The long build-up was seen from 17,400 to 17,750 strikes. The 17,850 strike call has seen a short built-up, and the OI increased by 351 per cent. On the put side, all the strikes have seen a short build-up. The put of 17,700 strikes open interest increased by 832 per cent. Max Pain is at 17,500, and the VWAP is at 17,513.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
MAYUR UNIQUOTERS ​ ............ BUY ....... CMP Rs 580.00
BSE Code :522249
Target 1 : Rs 633
Target 2 : Rs 645
Stoploss : Rs 535 (CLS)
Current Observation:
• Mayur Uniquoters is the largest manufacturer of artificial leather. It uses the ‘release paper coating technology’ in India. It has grown from 0.25 million linear metres to 4.05 million linear metres per month. The company has seven state-of-the-art Italian coating lines and world-class infrastructure that includes knitting, processing, heat setting, coating, embossing, printing, lacquering, tumbling and laminating. It established two plants in Rajasthan and one in Madhya Pradesh. It has its own research & development centre. It exports to 17 countries, including the USA, UK, Russia, South Africa, and so on.
• Technically, the stock has broken out of a 21-week Stage-2B breakout with above-average volume. The price structure also looks like a 47-month cup & handle pattern, which broke this week while the depth of the cup was 79 per cent. For the last two weeks, an increase in volume shows high accumulation. The stock is comfortably placed above its key moving averages i.e. around 24 per cent and 25 per cent from 50-DMA as well as 200-DMA, respectively. It has recently broken out of a base in its weekly chart and is trading around 6 per cent from the pivot point. The Elder impulse system shows a strong bullish price structure. Pring's KST is about to give a buy signal.
• As the stock has already retraced 100 per cent of the prior downswing and registered a fresh bullish pattern breakout, it has the potential to move to further highs. The stock can be bought at the current market price with a stop-loss of Rs 535. The near-term target (for two weeks) is placed at Rs 633. And in the short-term (three months), it can test Rs 645. The pattern target is at Rs 846 in less than one year.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of APL Apollo Tubes Ltd at Rs 948 in issue no. 07 (dated December 06, 2021). Post our recommendation, the stock witnessed a minor correction along with low volume. Currently, the stock is hovering around our recommended price. However, we can expect to see a smart upmove if it closes above its recent swing high of Rs 957. We would advise our readers to hold this stock with a stop-loss of Rs 890 on a closing basis, as the stock is likely to move higher from the current levels.