Technical
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : The volatility increased at life-time highs as the market ended in a flat note. Reliance and auto stocks rescued the market from closing below Tuesday’s low. If that had happened, a serious bearish engulfing pattern would have occurred. The market marginally escaped from that eventuality. But the Bank Nifty has formed a bearish engulfing pattern near to its lifetime highs. These patterns are not good signs for the market. Meanwhile, the broader market including Midcap and Smallcap declined for the second consecutive day. The advances were much lower than the declines. All the sectoral indices other than energy index closed with losses. At one point, Nifty fell 120 points from the day's high. Interestingly, the open and high prices are the same for the day. For the next week, the bulls need to move this level to continue the rally. Due to the long weekend and weekly expiry, the traders were not interested in continuing their positions and majority of them took the profits from the table. The divergences are still continuing. The Nifty made three higher peaks, and at the same time, the RSI made three corresponding lower peaks. The Thursday move may be because of weekly expiry, but it also gave caution to the traders. Now the bulls need to protect 11760-11700 level to move further upside. If you keenly observe, the Nifty is rallying from the 11600 level since February 20, but the volumes were consistently declining all these days. This is a serious cause for concern for the bulls. The Monday level of 11800 will act as a point of control, and above this level, the bulls will continue the rally. However, if Nifty sustains below this level, the bears are ready to take control of the market.
NIFTY DERIVATIVES: In the last four trading sessions since the last expiry, Nifty futures gained 97.65 points or 0.84 per cent. After a decisive breakout from the two-week range on Tuesday, it was unable to sustain above the breakout level the very next day. This shows that the breakout has fizzled out. On Thursday, Nifty future fell about 0.49 per cent and volumes and open interest increased. This shows the shorts were built up. From 11350 to 11650, Call options witnessed long liquidation and above 11,700 strike, Call options witnessed the short buildup in monthly or next week series. Interestingly, from 11,750 to 11,950 strike Put options saw a long buildup. The overall open interest increased by 2.98 per cent. Open Interest-wise Put-Call Ratio (PCR) is at 1.3, which is a bearish sign. As we are just one week away from April expiry, the rollovers were seen at 12.5 per cent. India VIX was up by 4.81 per cent. The highest open interest is seen with bearish bias in Reliance infra, Reliance Capital, DCB, Chennai Petro and Bharti Airtel. The highest open interest with bullish bias is seen in MFSL, Wipro, Shreecem, Cipla and Tata Motors.
STOCK STRATEGY
TATA CONSULTANCY SERVICES ................ BUY ............ CMP Rs. 2145.50
BSE Code 532540
Target 1 .... Rs. 2275
Target 2 .... Rs. 2415
Stoploss ...Rs. 2030 (CLS)
✓ Current Observation: Technically, on Monday, the stock has broken out of 28-week cup and handle pattern with a depth of 21.6 per cent. The stock is trading above the pivot and 200-DMA and 50-DMA. At the same time, it also closed above the 61.8 per cent retracement of October 2018 fall.
✓ The MACD line once again closed above the signal line and zero line. The RSI has broken bullish symmetrical triangle and the price has broken out of 43-bar ascending triangle.
✓ The stock is meeting most of the CANSLIM criteria, including price strength (83), and EPS strength (83). Also, the number of FIIs holding this stock rose by 47 to 1444 and on Monday the stock recorded the highest volumes in recent past.
✓ BUY this stock at the CMP with a stop loss of Rs 2030. The initial target is the previous high of Rs 2275 and, thereafter, it can reach up to Rs 2415.
REVIEW OF STOCK STRATEGY
We had recommended buying the stock of Manappuram Finance at Rs 127.30 in issue no. 25 (dated April 15, 2019). Post our recommendation, the stock has been witnessing consolidation along with low volumes. The stock is still trading above its pivot and above the short and long term moving averages. The technical parameters of the stock still look promising. We would advise our readers to hold this stock with a stop loss of Rs 115 on a closing basis, as the stock is likely to move higher from the current levels.