Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : The benchmark index is trading at a tight range since the last week. With three days of negative closing and two days of positive closing, Nifty is consolidating for the time being. After trading in the range of 240 points, it settled with 36.7 points gain since last Thursday’s close. It formed a bearish gravestone doji at resistance but negated with the next bullish move. Again on Thursday, it formed another bearish dark cloud cover. Even on last Friday, it formed a bearish engulfing pattern. As the market is undecided about the direction, these kinds of pattern failures confuse the traders. The 50-DMA support hold for the second day. The index reacted from the resistance point for the second consecutive day. The market breadth turned negative once again and the majority of the sectoral indices were closed in negative territory. Ten out of 12 Bank Nifty stocks closed in red. Bank Nifty faced resistance at 50-DMA for the second day and closed at a three-day low point. The Stochastic oscillator in Nifty and Bank Nifty reached to an extreme level and indicated a limited upside from now. Wednesday’s high of 12,232 will act as a crucial resistance for the time being. Though Nifty formed a hanging man pattern, the confirmation for a bearish move is required. The experience of pattern failure may or may not happen tomorrow but the weekly closing is important for the decisive direction. Any close below 50-DMA, 12,126 will be a bearish sign. Watch the zone of 12,126-12,232 for a trending confirmation.
NIFTY DERIVATIVES: Nifty futures gained just 26.00 points since the last weekly expiry after a trading range of 262.7 points. On Thursday, Nifty fell by 0.53 per cent and was trading with 11 points discount to the spot. On a falling day, the open interest rose by 6.85 per cent. Even Bank Nifty futures traded at a discount and the open interest rose by 14.7 per cent. This data indicate that shorts were built up in the market. The rollovers were seen at 7.91 per cent. For the next weekly expiry, the open interest wise Put-Call Ratio (PCR) is at 1.25 and for a monthly expiry, the PCR is at 1.04. For next week, the highest Call open interest is seen at 12,200 strike with 15,10,050 OI as 12,100 Puts have 10,41,225 open interest. The total Call open interest is at 70,88,325 and the total Put open interest is at 73,99,425. Interestingly, the 11,500 strike has a high open interest of 83,21,625. Traders are betting on the market fall by buying deep out of the money put options. Most of the call strikes witnessed a long liquidation. On the put side, a short covering is witnessed. The 12,200-12,300 strike put options saw a short covering. India VIX is stable at 13.37 compared to the last Thursday's 13.78. The implied volatility increased from 13.91 to 16.71. This indicates that volatility will increase from next week. On high volatility, the market may trade in the zone before taking a decisive direction.
STOCK STRATEGY
TITAN COMPANY LTD. ....................... BUY ....................... CMP Rs. 1,298.70
BSE Code ...... 500114 Target 1 .... Rs. 1,389 | Target 2 .... Rs. 1,400 | Stoploss.... Rs. 1,228
✓ Current Observation: Technically, the stock is clearly in the uptrend on the long-term chart. The stock is making higher highs on a daily chart after a base formation of Rs 1,135 levels. It has broken out of the 63-day flat base pattern on February 4. It consolidated for six days and moved above the consolidation high. It is also forming a cup pattern for the last 16 weeks of a flat base breakout with above-average volume. The stock is also trading above 61.8 per cent retracement level.
✓ The MACD has given buy signal on a weekly chart and is trading above the signal line for the past eight days. The RSI is also making higher highs & higher lows and reached the super bullish area. Currently, it is above the prior swing high.
✓ The ADX is at 31.34 on the daily chart, which indicates strength in the uptrend. The stock is also meeting many of the CANSLIM parameters. Its relative price strength is at 78 and EPS strength at 82. Good buyers’ demand indicates the institutional interest in the stock. Its Return on Equity (ROE) is at 22 per cent.
✓ The reasonable earnings strength and technical strength makes the stock a buy set-up. Buy this stock at Rs 1,298.70 with a stop-loss of Rs 1,228. The target is placed at Rs 1,389-1,400 in a short-term.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of ICICI Bank Ltd at Rs 541.65 in issue no. 16 (dated February 10, 2020). 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. The technical parameters of the stock still look promising! We would advise our readers to hold this stock with a stop-loss of Rs 520 on closing basis, as the stock is likely to move higher from the current levels.