ICICI Bank: Will history repeat itself and take stock past Rs 600 level? Lets see what derivative data suggests

ICICI Bank is a leading private sector bank in India. It has about 6.34 per cent weightage in Nifty 50 as well as 18.63 per cent weightage in Bank Nifty.   

As per its usual course, the stock is likely to report its earnings during the weekend i.e., on Saturday (April 24). In the last two instances after the announcement of quarterly numbers, the stock witnessed a sharp rally. For instance, the last quarterly earnings were announced on January 30, 2020, and since it was a market holiday, the impact on the stock was seen in the next trading session. The stock ended with a staggering double-digit gain of 12.44 per cent and settled above its important psychological mark of Rs 600.   

Results for the quarter ended September 2020 were announced on October 31, 2020, and since it was a weekend, the impact on the stock was seen on November 2, 2020. It opened with a massive gap-up of 6 per cent and made a high of Rs 422.80 and settled at Rs 417.45.   

Considering the most important assumption in technical analysis i.e. 'history tends to repeat itself’, we believe that a similar quantum of moves is on cards. However, the direction in which the moves are likely to come is a piece of the puzzle.   

Now let’s look at the derivative data, what does it suggest? The stock has closed down by over 1.5 per cent and there is a 9.17 per cent net open interest addition seen in April series future contract and as per the theory, when there is a fall in price along with the rising open interest, it indicates a short build-up. The maximum concentration of open interest on the Call side is seen at 600 strike price while the total open interest of 600 call option strike stands about 63 lakh. Besides, the maximum open interest addition seen on Friday was at 580 Call options, which was nearly 19 lakh. The level of 600 is likely to act as a strong barrier as the highest open interest on the call side is seen at this strike and the 50-DMA is also placed around these levels. On the put side, unwinding has been seen in the 570-strike price. Meanwhile, PCR stands at 0.51.   

The data is signalling that the stock is on a weak footing. However, any surprise in the quarterly number might trigger stock-covering and the stock may once again reclaim its important psychological mark of Rs 600.