Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : The Indian benchmark index, Nifty, closed at a new lifetime high. In November, it gained 2.30 per cent or 273.7 points. After forming an inside bar on Wednesday, it has formed Hanging Man kind of a pattern at lifetime highs. After three consecutive Doji bars on a weekly chart, it formed a very big bullish bar. As in uncharted territory, the probable resistance is placed at 12,286 levels. Since there is no significant bearish signal on any timeframe, it is advised to continue the long position with a trailing stop loss of prior bar low. The RSI, once again, reached near the 70 levels and negated the Head and Shoulder pattern breakdown. The MACD histogram again turned to green territory. Even though the stochastic oscillator has been in the overbought zone since last month, the market has not shown any weakness. The ADX is as high as 30.35 show the trend strength. +DI is above the -DI and ADX are above the +DI. This sequence is also a bullish sign. As Nifty gained 9.64 per cent or 1,068 points in just 34 trading sessions, it may witness profit booking at higher levels. Reliance has become a Rs.10 lakh crores market cap company. It is the first company to reach that benchmark. The market breadth and some sectoral indices are coming out of the bottoming formations. For now, be with the trend and continue with a bullish bias on the market.
NIFTY DERIVATIVES: Nifty futures gained 176.65 points or 1.48 per cent since the last weekly expiry. On the whole, the November series gained 236.40 points or 1.98 per cent. Most of the gains are coming in the last week only. The rollovers, which are 66.16 per cent, are very optimistic and above the three-month average. The Nifty Put Call Ratio (PCR) is at 1.45, which indicates that the market is at an overbought condition. For the 5th December weekly series, the open interest wise PCR is as high as 1.63, which is the recent most high. It is very critical for the Nifty to sustain at this level. The Maximum Call open interest is at 12,200 strikes and the highest Put open interest is at 12,000 strikes. The total Put open interest is also highest in recent times with 1,08,14,700 and the Call open interest is at 66,38,025. The call writing is witnessed in the 12,200 to 12,350 strike and long build-up is seen in 12,000 to 12,150 strikes. At the same time, on the Put side, shorts were build up in the 11,950 to 12,350 strike. More put are being written for the first time in recent times. Currently, The Nifty is trading at 13.91 Implied volatility and India VIX is declined by 4.31 per cent to 13.98. The current derivative data suggests that the 5th December weekly series' max pain is at 12,100 level.
STOCK STRATEGY
BALAKRISHNA INDUSTRIES ...................... BUY .............. CMP Rs933.15
BSE Code ...... 502355
Target 1 .... Rs1010
Target 2 .... Rs1020
Stoploss .... Rs870 (CLS)
✓ Current Observation: Balkrishna Ind has broken out of a cup pattern with 32 per cent depth. It has also registered a golden cross over, which is a long term bullish sign. The 50-DMA crossing 200-DMA is called the Golden crossover. The volumes are also increasing for the past three weeks. The record volume after the week ended June 30 confirms that the stock has turned into a bullish trend.
✓ Interestingly, after losing over 52 per cent from the August 2018 highs, It retraced more than 61.8 per cent, with today’s 5 per cent gain.
✓ The stock is meeting Minervini’s set up. The stock is trading above the 40,30 and 10 weekly moving averages and they have turned upside. On a daily chart, it also has broken out of a bullish flag pattern with volume confirmation.
✓ The stock is also meeting the majority of the CANSLIM criteria. The price relative strength (RS) and the EPS strength is at 80. Good buyer demand shows the institutional activity in the stock. Institutional investors increased their stake in the company by 2.01 per cent last week. The RoE is reasonably good at 17 per cent. 31 percent of EPS growth in the recent quarter shows the fundamental strength.
✓ Buy this stock at Rs. 933.15 with a stop loss of Rs. 870. The intermediate target is placed at Rs. 1,010 - Rs. 1,020.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Lupin Ltd. at Rs 770.75 in issue no. 05 (dated November 25, 2019). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of Rs. 809.00. We had given a ‘Book Profit’ message at the level of Rs. 805.85 through our SMS service on November 26, 2019. Thus, investors who had taken positions according to this strategy would have made a decent profit.
