Technical
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Finally, the Nifty witnessed some solid performance and closed above the psychological level of 12000. In November till now, it has gained 134.60 points or 1.13 per cent. It took three consecutive attempts for the benchmark index to close above the prior higher swings. However, it is forming bearish or indecisive bars almost every day. Even though the market is moving up, it looks tired with this kind of bars. Rather than positive triggers, the market is waiting for a negative one.
In such a scenario, the correction will be sharper. The Nifty took support at 8EMA several times in the recent past. It is just 90 points away from its lifetime high. Generally, the breakout of the three-day tight base is a bullish sign. Here, it indicates that the index may touch a new lifetime highs. Nonetheless, we expect a meaningful correction as it is in an overbought condition and 900 point rally form the October lows. After crossing the 12,100 levels, it may witness a corrective consolidation before scaling to new highs. Hold the long positions as long as the previous day's low is protected. Please keep in mind that the sell opportunities will come only below 11,880 levels. Till then, it will be better if you avoid short positions. As the Q2 financial results have entered into the final leg, it is time to identify the strong performers and accumulate them in the dips.
NIFTY DERIVATIVES: The Nifty futures gained 140.20 points or 1.17 per cent since the last Thursday. It is just 63 point away from its lifetime high. The volumes are on a lower side for the past week and, consistently, recording lower volumes since the last week of September. The open interest increased by 4.05 per cent, indicating that the bullish strength will continue. However, the Put-Call Ratio(PCR) has already reached to 1.24 levels, which indicate the overheat in the market. The Open interest wise PCR is at 1.14 for the November 14th weekly expiry. The maximum call open interest is at the money strike price of 12,000. The 12,000 strike has 13,82,100 open interest. The maximum put open interest is at 11,900 strike with 31,56,525. For the next week, the total call open interest is at 81,93,225 and put open interest is at 93,20,550. The long build-up is seen in calls from 11,800 to 12,100 strike but there is a short build-up seen in 12,150 and 12,200 strikes. On the put side, strike shorts from 11,800 to 12,250 were build up. The Nifty is trading at a 16.17 Implied Volatility. The India VIX has cooled off 3.6 per cent and settled at 15.20. The current derivative data suggests that the max pain is at 12,000 for the next weekly expiry.
STOCK STRATEGY COLPAL .... BUY ........... CMP Rs1601.60
BSE Code ...... 500830
Target 1 .... Rs1720
Target 2 .... Rs1740
Stoploss .... Rs1510 (CLS)
✓Current Observation: Colgate-Palmolive has broken out of the 29-day ascending triangle pattern with an above-average volume. It has broken out of the six-week flat base pattern as well. After breaking out of the 37-week cup pattern, it is consolidating for the past 6 weeks. The Cup depth is about 18.58 per cent. From the cup breakout point, it has already gained 18.2 per cent. Now, the flat base is formed with a 9.28 per cent range. The stock is clearly making higher highs and higher lows since June 2016.
✓ In its recent Q2 results, the stock posted a 24 per cent growth rate in EPS and maintained the sales growth. With a 54 per cent Return on Equity, it looks very attractive at current valuations.
✓ Technically, it inched up to lifetime highs after a brief flat range. The RSI is in the super bullish zone and the MACD is also at a historical high. On the daily chart, RSI just comes out of falling wedge pattern and the MACD line is about to break the signal line.
✓ The trend strength indicator, ADX, is showing extreme bullishness in the stock. Its price relative strength is as high as 93 and the EPS strength is fairly good at 75. It is meeting the CANSLIM parameter for investment. Buy this stock at Rs. 1,601.60 with a stop loss of Rs. 1,510. The short-term target is placed at Rs. 1,720 - Rs. 1740.
REVIEW OF STOCK STRATEGY We had recommended our readers to buy the stock of Bajaj Finserv at Rs. 8,137.10 in issue no. 02 (dated November 04, 2019). Post our recommendation, the stock moved higher in line with our expectation and went on to touch Rs. 8,887.25 mark. We had given a ‘Book Profit’ message at the level of Rs. 8,387.50 through our SMS service on November 01, 2019. Thus, investors, who had taken positions according to this strategy would have made a decent profit.