Technical Analysis
ADANI GAS
BUY ............. CMP Rs 179.75
BSE Code ...... 542066
Target 1 .... Rs 200
Target 2 .... Rs 205
Stoploss .... Rs 165 (CLS)
✓ Current Observation: Technically, after gaining massive volume for the past three days, the stock hit a new lifetime high on Thursday. As the stock is trading at lifetime highs, all the trend indicators are bullish.
✓ The stock has formed a 142-day cup pattern with 30.65 per cent depth. The long-term charts look optimistic after a reasonable corrective consolidation.
✓ The leading indicator RSI is above the prior swing on a weekly chart. The MACD histogram is suggesting a bullish momentum after five weeks of flat momentum.
✓ The ADX is as high as 35.7 on weekly timeframe, indicating a strong bullish strength in the trend. The stock is also meeting the CANSLIM characteristics. Its price relative strength is as high as 94 and the EPS strength is at the highest level of 99.
✓ The greater buyer's demand indicates the institutional investors' interest in the stock. The EPS growth is 134 per cent in the last quarter, along with 21 per cent Return on Equity, making the stock fundamentally attractive.
✓ Buy this stock at Rs 179.75 with a stop-loss of Rs 165. The target is open to Rs 200-205.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Manappuram Finance Ltd at Rs 174.40 in issue no. 09 (dated December 23, 2019). Post our recommendation, the stock moved higher in-line as per our expectation and went on to touch the level of around Rs 180.30. We had given a ‘Book Profit’ message at the level of Rs 179.90 through our SMS service on December 30, 2019. Thus, investors who had taken positions, according to this strategy, would have made decent profit.
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty once again reached the lifetime high as well as recorded a closing high during the eight days of consolidation period. The range is smaller than the earlier one, limited to just 175 points. This flat zone is giving a divergent signal as a major indicator. As we discussed earlier, the divergences in all time frames are not a good sign at this juncture. The Nifty is moving continuously up but still, the trend strength looks weaker. The momentum is waning. Within this 175 point flat zone, the leading indicator RSI formed lower highs. The ADX is moving down. The MACD histogram is still around zero with a negative momentum. Indifferent behaviour of the price is surprising the fundamental analysts too. In any case, the flat base breakout or closing above 12,294 means another 100-200 point rally on cards. As discussed earlier, closing below 12,118 is the first sign of strengthening weakness. At this higher valuation zone on the backdrop of weaker economic data points, there is an element of doubt in the mind of the traders. Let’s watch as to where this less-trustworthy rally takes. As of now, be with positive bias as long as it is trading above 12,119.
NIFTY DERIVATIVES: Nifty futures gained by 142.25 points or 1.16 per cent since last weekly expiry. There is a complete opposite movement in the index in comparison to the last expiry. The index is seen moving in the range of 139 points since the last five days. In the first week, the rollovers were seen at 7.1 per cent. The open interest is increased by 6.31 per cent on a lifetime high close. Put-call ratio is 1.26. Open interest wise PCR for the next weekly expiry is 1.49. A lot of Put, open interest is visible in 12,000-12,300 strikes. A total of 1,08,37,650 open interest on put side, mostly out of the money strikes open interest indicates the short build up. At the same time on Call side, a long build up is seen from 12,050 to 12,500 strikes. The 12,300 strike call has a maximum open interest of 19,16,700 and 12,200 strike has a maximum open interest of 19,55,475. The implied volatility increased to 16.17 from the level of 13.91. India VIX rose to 11.5 from 9.6 in the last four days. It is poised to increase further in the coming days. As per the current derivative data, the Max Pain for the next weekly expiry is at 12,250.
