Technical
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : The Nifty traded in a narrow range on the weekly option expiry day. It once tested the critical support level of 11,550 and bounced into positive territory at the close. For the last one week, it is trading in the zone of 11,622-11,780 (future level). Last Thursday (4 April), Nifty futures closed 11,679, and this Thursday, it closed at 11,669 with a loss of just less than 10 points. The index traded whole week with indecisiveness as the general elections have already begun. On Thursday, the index breached the 13-EMA on intra-day basis, but closed below the 8-EMA. It formed Doji, another indecisive candle, and for the second, it closed within the upward channel. MACD histogram increased to 20.13, which indicates that the downward momentum is increasing. Even after Nifty closed in the positive territory, the RSI is looking downward. The advance-decline ratio was negative on Thursday. The auto and FMCG sectors were the leaders and IT and banking sectors were laggards on Thursday. Overall, the market condition is looking weak, but on Friday, the market may open in the gap as many indicators have reached oversold position and some of them are indicating that a bounce is possible on the 60-minute chart. There is a weak positive divergence in the RSI in one hour chart. As long as Nifty (spot) does not close below 11550, there are chances of a sharper bounce. At the same time, 11,710 works as resistance for the next few days. Within this range, traders may get clear trading opportunities.
NIFTY DERIVATIVES: For the last one week, Nifty and BankNifty traded in an extremely narrow range closed with minimum losses. The Option writers made a killing this week as Theta gave them good profits. At The Money(ATM) call option of 11,600 strike fell from Rs. 162 to worthless. At the same time, the same strike Put option also fell from Rs. 81 to Rs. 3 in last one week because of range boundness the market. All the Out of The Money(OTM) Options closed worthless this week. Nifty closed with just 9.65 points at 11,668.9 and the Bank Nifty closed with 209 points loss at 29,945. Both were holding critical supports for the last one week. The Nifty open interest declined by 2.25 per cent and BankNifty open interest also decreased by 8.67 per cent. This open interest data shows that the long unwinding is happening in the market. The rollovers are at 8.54 per cent. The highest bullish open interest was seen in GodrejCP, PVR, DHFL and Ujjivan. And bearish open interest in BEL, Vedanta. For the Next week options Nifty had the highest open interest in 11,700 strike price followed by 11,600. And Highest Put open interest is at 11,500 and followed by 11,400. The current option tells us the range bound activity will continue for the next week as well. Nifty may trade in 11,700 - 11,400 range. The Max Pain is at 11,600 level. With this backdrop, apply Short straddles and strangles in Options for next week as well.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
MANAPPURAM FINANCE ........................... BUY ............... CMP Rs. 127.30
BSE Code ...... 531213 Target 1 .... Rs. 140 | Target 2 .... Rs. 160 | Stoploss ...Rs. 115 (CLS)
✓ Current Observation: Technically, the stock is trading at lifetime high and near the pivot. It formed a 48-week cup pattern. Trading much above the 200- DMA and 50-DMA and all of them are trending upside. It has a decent ROE of 18 per cent. The FII holding increased by 1.26 per cent in this company, and overall institutional holding is currently at 45.17 percent. The number of FIIs holding this stock rose by 7 to 163.
✓ The RSI is in super bullish zone and reached above 70 for the first time after October 2016 on the weekly chart. The volumes are spiked this week to 50-week average.
✓ The MACD is above the zero line and the signal line for the past 20 weeks. The ADX is at a very healthy position with 24.85 and the +DI is much above the -DI, which shows that the trend strength is strong.
✓ The stock is meeting all the CANSLIM criteria and Mark Minervini’s trend setups.
✓ Buy this stock at Rs. 127.30 with a stop loss of Rs. 115. The targets are open towards Rs. 140 in the short term and Rs.160 in the medium term.
REVIEW OF STOCK STRATEGY
We had recommended buying the stock of HDFC at Rs 2041.25 in issue no. 24 (dated April 8, 2019). Post our recommendation, the stock has been witnessing consolidation, along with low volumes. However, the stock has the potential to scale higher. We remain bullish on the stock as the stock has witnessed a decent breakout of 36-week cup and handle pattern. Hence, we would advise holding this stock for the target price of Rs 2165.