Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty has broken out 34-day range of 11,800-12,150 during the week. The benchmark index has gained by 287.9 points or 2.41 per cent in the last five trading sessions. The index was gained by 427 points in the last 7 trading sessions driven by banking and financial service stocks. Technically, we discussed in the earlier column of achieving target above 12,150 level, so, as per that, we hit a bulls eye as Nifty touched our target.
The possible next level target is at 12,400-12,500 level now. As long as Nifty is able to protect the prior day low, it is advised to hold the long positions with a trailing stop-loss. The leading indicator RSI (66.95) has broken out of downward channel and is near to the prior swing high of 68.78. The MACD has given a fresh buy signal by moving above the signal line on Wednesday. The momentum is built up with a continuous buying interest from the institutional investors. The momentum is reflected as the new highs are forming with the gaps. Let us see whether these gaps will fill or not. As the Nifty closed above the upper Bollinger Bands, it is time to book partial profits in the index. As Nifty is trading in uncharted territory, there is no weakness visible in any trade set up or technical parameter. In these conditions, the best strategy would be running the long positions with a trailing stop-loss of prior day low. In any case, if the Nifty closes below the level of 12,150 then, the short-term weakness is possible.
NIFTY DERIVATIVES: Nifty future gained 306 points or 2.55 per cent since last weekly expiry or in five trading sessions. The rollovers were seen at 15.09 per cent. At a new high, the Open Interest declined by 3.86 per cent and the Put-Call ratio is at the highest level of 1.58 per cent. A long unwinding is seen in the market, which is at swing high. For the December series, the maximum call open interest is seen at 12,300 strike and the maximum put interest is at 12,000 strike. The total call open interest is at 23,983,575 and the total put open interest is at 38,128,725. The more put positions are indicating that the upside is limited. There is a short covering seen in 12,050-12,150 strike calls and the long build up seen in 12,000 and 12,200 strike calls. At the same time, a short build up was seen in 11,750 to 12,200 put strikes. The current derivative data suggests that the Max Pain for the December series is at 12,200. Next week might be crucial for the market to sustain at the higher levels. Currently, Nifty implied volatility is at 12.34 and the India VIX is at 12.12.
STOCK STRATEGY MANAPPURAM FINANCE LTD. .................... BUY ................ CMP Rs 174.40
BSE Code ...... 531213
Target 1 .... Rs 189
Target 2 .... Rs 194
Stoploss .... Rs 162 (CLS)
✓ Current Observation: Manappuram Finance is the country’s leading gold loan Non-Banking Financial Company (NBFC). The stock reached to a new lifetime high on Thursday. It has broken out of a five-week flat base pattern with decent volumes. As price moved above the prior pivot level, it is also trading above all the short and long-term moving averages. And even the moving averages are trending up.
✓ The leading indicator RSI has formed an inverted head and shoulder, and it is in the super bullish zone. The MACD line is above the signal and zero lines. The histogram suggests the bullish momentum in the stock.
✓ The ADX is at 21.71 and +DI is above the -DI, indicating a strength in stock. The stock is also meeting most of the CANSLIM characteristics. Its price relative strength is as high as 96 and EPS strength is 97. The greater buyers demand is indicating the institutional investors' interest in the stock. Its consistent double-digit growth in sales and EPS shows a fundamental strength. The Return on Equity (ROE) is also attractively at 18 per cent.
✓ Buy this stock at Rs 174.40 with a stop-loss of Rs 162. The target is open to Rs 189 - Rs 194.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Bajaj Auto at Rs 3,265.30 in issue no. 8 (dated December 16, 2019). Post our recommendation, the stock has been witnessing consolidation along with a low volume. The stock is still trading above the short and long-term moving averages and the technical parameters of the stock also looks promising. We would advise our readers to hold this stock with a stop-loss of Rs 3,150 on closing basis, as the stock is likely to move higher from the current level.
