Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE SPOT

NIFTY : Nifty retraced 61.8 per cent of the fall of January 20 to February 3 low, in just four days. This faster retracement is generally followed by a consolidation. There are a very few instances, where the V-shape recoveries is sustained for a long period. The recent example is January 8 to January 14 rise of 444.65 points and consolidated. The indecisive doji or a spinning top is the first indication of tiredness in the V-shaped recovery. Interestingly, this doji candle is forming at 50-DMA and it closed above it. The MACD line is still below the signal line and zero line. RSI bounced sharply from 30 to above 52 levels. Now, it is important to sustain above 55-zone to continue the rally. Wait for a consolidation to take the fresh long positions as long as Nifty trades positive in this direction. But any close below the prior bar low, will be a sign of weakening trend. For any short position, wait until it closes below the prior bar low. A close below 12,030 will be a confirmation for 12,160 levels as swing high. There is a higher probability of testing 11,950 level again. In any case, continue to trade in the positive territory, it may test 12,270-12,300 level. It is the time to be cautious about the bullish bias.

NIFTY DERIVATIVES: Nifty futures gained 87.7 points or 0.73 per cent, since the last weekly expiry after 445 point fall in the first two days and 569 points sharp recovery, mostly due to the short covering. Before the Budget, the historical high level of shorts were covered in the last three days. The rollovers were seen at 5.37 per cent in the first week of the current month. The open interest increased by 3.89 per cent. The Put-Call Ratio (PCR) for next week is at 1.29. For the monthly series, PCR is at 1.25. The PCR indicates that the market is next to the overbought condition. For next weekly series, the highest open interest was seen at 12,200 and 12,100 call strikes with 11,67,525 and 10,41,900 OI. On the Put side, the highest open interest was seen at 12,000 and 12,100 strikes with 13,74,150 and 12,08,700 OI. The total put open interest is 1,07,63,775 and the total call open interest is at 83,27,925. The short were built up in 12,300 and 12,350 call strikes. From 12,250 to 12,200 Call strikes saw a long build up. On the Put side, 11,900 to 12350 strikes saw the short build up. India VIX fell to 13.78 from the Budget day high of 17.93. The current derivative data suggests that the Max pain is at 12,050 levels.

STOCK STRATEGY ICICI BANK LTD. ................................ BUY ....................... CMP Rs 541.65

BSE Code ...... 532174  Target 1 .... Rs 565  Target 2 .... Rs 580  Stoploss .... Rs 520

✓ Current Observation: ICICI Bank is the one of India’s leading private sector bank with a network of 5,275 branches and more than 15,590 ATMs. Its business segment includes core banking, treasury, life insurance, general insurance and other fee-based services. The Q3 registered the NII growth of six per cent (QoQ) and 24.3 per cent (YoY). The net profit increased by 158 per cent YoY. The high profit is a result of 51 per cent drop in provisions.

✓ Technically, the stock has broken out of a bullish flag pattern. The stock is consolidating between Rs 520-546 zone for the past two months (45 trading sessions). This basing pattern’s resistance area is at a lifetime high zone. For several times, it tested this zone and consolidated. A breakout above this zone, the price will rally very sharply to the new lifetime high. It is trading above all the short and long-term moving averages. The MACD just gave a buy signal as the MACD line moved above the signal line and histogram turned green. The RSI is above the prior swing high and came out of the channel. Its price relative strength is at 89 and EPS strength is improved to 61. The good buyer's demand shows an institutional interest in the stock. The institutional investors increased their stake in the company by 2.29 per cent in the December quarter.

✓ Buy this stock at Rs 541.65 with a stop-loss of Rs 520. The targets are placed at Rs 565 and Rs 580 in the short to medium term.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Avenue Supermarts Ltd at Rs 2,051.65 in issue no. 15 (dated February 03, 2020). Post our recommendation, the stock moved higher in-line with our expectation and went on to touch the level of around Rs 2,145.05. We had given a ‘Book Profit’ message at the level of Rs 2,132 through our SMS service on January 31, 2020. Thus, investors who had taken positions, according to this strategy, would have made a decent profit.