Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : After making a swing high on the last weekly expiry, the Nifty is continuously declining since then. Nifty-50 lost 140 points or 1.17 per cent in the last four trading sessions. It has broken down the important upward trend line support on Wednesday and is trading below the very short-term moving averages. On Thursday, it took support at exactly 23.6 per cent retracement of October 9 to November 7 high-swing. It formed a hammer kind of pattern after another lower low and high. Even though the Nifty breadth is negative, it is able to close in positive territory with the help of HDFC and Bajaj twins, along with Infosys and ICICI Bank. The overall market breadth is also being negative on Thursday. The high volatility in the market did not make any higher highs in the shorter period chart. The benchmark index managed to hold critical support of 11,840 for the day, though it has broken on an intraday basis. Thursday low of 11,802 is critical for the next few days. In any case, if it closes below this level, it can test the 11,700 level very soon. If it also breaches this level, the next swing low support will be at 11,505. On the upside, any close above the prior bar high will take us to the prior pivot level and above. For current short positions, the trailing stop-loss would be a prior bar high. The stock-specific activity is on the higher side. A Few heavyweight stocks in the Nifty are making bullish moves and are near to their lifetime highs.
NIFTY DERIVATIVES: The Nifty futures index is down by 147.95 points since the last weekly expiry. Except this Thursday, it has closed in negative almost every day. Although it closed positively with negative breadth, it actually formed a lower high and lower low. The open interest is up by 2.93 per cent. At the end of a second week, the rollovers are at 4.52 per cent. The Put-call Ratio (PCR) is at 1.02. For the weekly expiry on November 21, the highest opening is at 11,800 strikes, put together with 13,23,225 open interest. The 11,900 strike call has 11,93,025 open interest. The total call interest is at 74,97,225 and the total put interest is at 76,67,700. The November monthly expiry PCR is at 1.19, which indicates that the immediate market condition is in a neutral zone and the monthly condition is near the bearish zone. 11,900 to 12,100 strikes witness the call writing and short buildup. At the same time, from 11,700 to 12,100 strikes witnessed the Put short buildup. The bulls and bears are trying to take control over the market. The Nifty is trading with 13.91 IV. The IV percentile is at 48. This means 48 per cent of the time Nifty traded at this IV. The volatility index India VIX is at 15.65, down by 4.95 per cent. Considering the current derivative data, the max pain for next week and monthly expiries is at 11,850.
STOCK STRATEGY
TATA CONSULTANCY SERVICES ................. BUY ............... CMP Rs2195.60
BSE Code ...... 532540
Target 1 .... Rs2310
Target 2 .... Rs2335
Stoploss .... Rs2100 (CLS)
✓ Current Observation: After correcting 50 per cent of the previous upswing, the stock is bouncing for the last two days. The buying volumes are higher than the last 6 days' fall, which indicates that it is accumulated by smart investors at a lower level. It also retraced 50 per cent in just two days of the 6 days' fall.
✓ The stock is trading above all short- and long-term moving averages. It took a support at 200EMA like several times in the past. The stock several times faced and still facing a resistance at Rs. 2,290 zone. This pivot level is now just 4 per cent away.
✓ The leading indicator, RSI, is taken support at 50 and bouncing. The Stochastic oscillator has just given a buy signal on this stock.
✓ The MACD histogram turned positive again after a pause. The price relative strength (RS) improved to 75.
✓ Buy this stock at Rs. 2,195.60 with a stop loss of Rs. 2,100. The short-term target is placed at Rs. 2,310 - Rs. 2,335.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Colgate- Palmolive(India) Ltd. at Rs. 1,601.60 in issue no. 03 (dated November 11, 2019). Post our recommendation, the stock remained in the range as benchmark indices traded in a narrow range. The stock is still trading above the short- and long-term moving averages. The technical parameters of the stock look promising even now. We would advise our readers to HOLD this stock, with a stop loss of Rs. 1,510 on closing basis, as the stock is likely to move higher from the current levels.