Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty is trading in 240 point range (11,800-12,040) for the last 15 trading session. There has been several indecisive and bearish bars in this period. Even though it gained 96 points or 0.81 per cent in the last 5 trading sessions, it added two distribution days. The overall market breadth is not improving as yet. The leading sectors, such as IT and FMCG, are subdued for some period. Only the select banks and index heavyweight, Reliance, has kept it from the fall. On Thursday, though volatility was on a lower side compared to the past, the Nifty made a big engulfing candle. Before that, almost all the bars in the week were bearish or indecisive in nature. The index filled the Wednesday’s gap and closed near to the lower support. As it is unable to sustain above the resistance area or closing above 12,000 and there is a serious negative divergence in RSI, it is the time to be cautious about the uptrend. Meanwhile, there is no clear signal for the bearishness. The Nifty has made two similar tops but RSI has made lower tops on a daily chart. In any case, if the RSI falls below 57 levels, expect a bearish move in the market. The MACD histogram is negative for the last one week. Closing below Wednesday's low is a sign of weakness in the market. Keep a watch at 11,800 levels on downside and 12,040 levels on the upside. If this range breaks, the market may witness a sharp move on the either side.
NIFTY DERIVATIVES: Nifty futures has gained 72 points or 0.6 per cent since the last expiry. On Thursday, a big bear bar formed, indicating the long unwinding in the market. To confirm this, an open interest has also formed alongside at 0.27 per cent. The Put-call ratio (PCR) has climbed up and standing at 1.14. It is still one week from November monthly expiry and the rollovers are at 9.43 per cent. For the monthly expiry, the open interest-wise PCR is at 1.22. This indicates that the upside is limited. The total call interest is at 22,293,450 and the total put interest is at 2,70,77,325. The maximum call open interest is at 12,000 strikes with 38,16,075. On the Put side, the maximum open interest is at 11,900 strikes with 28,93,950. The current derivative data suggests that the markets may continue to move in sideways for some more time. It also suggest that the max pain is at 11,950. The next week is suitable for neutral option strategies.
STOCK STRATEGY
LUPIN ............ BUY ....... CMP Rs770.75
BSE Code ...... 500257
Target 1 .... Rs805
Target 2 .... Rs820
Stoploss .... Rs740 (CLS)
✓ Current Observation: After a decline of 70 per cent from its lifetime highs, the stock is consolidating for the past few months and has formed a strong base around Rs. 700 levels. Currently, it is forming an inverted head and shoulders on the daily chart. There are several parallel highs or resistances placed at around Rs. 780 levels. The volumes are also improving for the past two weeks.
✓ The stock is trading above the 200- and 50-DMA, with these two long-term indicators turning up and showing that the stock is trending and on an upward move. The stock recovered 17 per cent from the recent lows in seven weeks.
✓ The RSI is above prior swings and over 50 zone. The MACD histogram is above zero line for the past four weeks. It also meets the majority of the CANSLIM characteristics now. Its price relative strength is near 70.
✓ The buyers’ demand is picking up as institutional investors have increased their stake by 0.86 per cent in Q2 of the current financial year. Even the Nifty Pharma index is also giving bottoming out signs. As one of the leading stock in the sector, it also has the potential to move up. Buy this stock at Rs. 770.75 with a stop loss of Rs. 740. The target is open to Rs 805- Rs 820 in the medium term.
REVIEW OF STOCK STRATEGY We had recommended buying the stock of Tata Consultancy Services at Rs. 2,195.60 in Issue No. 04 (dated November 18, 2019). Post our recommendation, the stock did not sustain at higher levels. On intraday basis, it slips below the support level but has managed to close above support level on the closing basis. At present it is hovering around the horizontal support. However, we can expect to see smart up moves, if it closes above the Rs. 2,135 level. We would advise our readers to hold this stock with a stop loss of Rs. 2,100 on closing basis, as the stock is likely to move higher from the current levels.
