Technical Analysis
SPOT NIFTY : Nifty fell 2,840 points or 22.85 per cent from its lifetime high in just 38 trading sessions. Many are comparing the fall with 2008 meltdown. But in 2008, Nifty took just nine trading sessions to fall 22.93 per cent on a closing basis. The leading indicator touched an all-time low. An indicator can be in oversold conditions for some period. An indicator reaching to an extreme oversold does mean that the market will bounce from here. As we had cautioned many times in our previous columns, the large-caps are leading the market fall. As we discussed earlier, the lifeline support of 9,950-10,100 zone breached decisively. It also retraced more than 50 per cent of February 2016 to January 2020 rally. As Nifty closed below the many bases and resistance areas now, it is the time to wait for another base to form. The 61.8 per cent retracement of the last four-year rally is placed at 8,966. We can assume that this could be a meaningful area of support. We if keenly observe Thursday’s free fall, 13 of Nifty 50 stocks fell by more than 10 per cent. And around 897 stocks, hit their 52-week low. The selling pressure due to uncertainties in the future has created a panic situation in the market. Nifty has made a lower low in all-time frames. Now the question is, to form a lower high, does it need to retrace upwards? As the global markets are in complete meltdown mode, we need to wait until there is a positive divergence in the indicator and at least 23.6 per cent retracement from the low. This is the time to exit some of the profitable positions in the portfolio and see who is still holding on with a hope. For now, avoid any kind of buying or you would be catching a falling knife. Wait for counter trend rallies to takeout profits from the table, if any. Until the clarity comes on the global economy and trade, better avoid the market!
NIFTY DERIVATIVES: Nifty Futures declined by 1,675.35 points or 14.88 per cent since the last weekly expiry. This is the biggest weekly fall after the weekly derivative series was introduced. On expiry day, only one stock (Tata Power) closed with a gain. In derivative segment, 58 stocks closed with more than 10 per cent losses. Nifty Futures closed with a 10 point discount to the spot. More than 8.3 per cent fall day, the open interest increased by 7.28 per cent. Even in BankNifty, open interest increased by 12.30 per cent, indicating that the short positions were in built-up. The rollovers stood at 9.73 per cent. For the next weekly expiry, the open interest wise Put-Call Ratio (PCR) is at 0.44. This means the swing low is almost in place. This kind of lowest PCR is not recorded in recent history. For March monthly series, the PCR is still at a high of 1.17. There is a possibility of bounce in short-term but for longer time frame, it is very bearish. Interestingly, for next weekly expiry, the highest call open interest is at 11,000-strike with 7,50,000 OI. On the put side, 9,000 strike has 6,22,425 open interest, which is the highest. The total call open interest is 75,03,600 and the put open interest is 32,87,850. Interestingly, the 9,400, 9,500, 9,600 and 9,700 strike have the short build-up in the calls and 9,450, 9,550, 9,650 and 9,750 strikes witnessed a long liquidation. On the put side, every alternate strike witnessed the long liquidation or long build-up. We need to watch the market moves in this unique situation. India VIX (41.16) also reached the highest level after 2009. The current derivative data suggests that Max Pain is at 9,700 for the next week.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
COROMANDEL INTERNATIONAL ................... BUY .................. CMP Rs. 561
BSE Code ...... 506395 Target 1 .... Rs. 600 | Target 2 .... Rs. 620 | Stoploss.... Rs. 530
✓ Current Observation: The stock is trading at 10 per cent away from its lifetime high. The stock has met all the targets of double bottom and retracing now. As of now, it retraced about 23.6 per cent.
✓ In a falling market, it fell just less than 10 per cent where the benchmark index-Nifty fell by 23 per cent. It has given 79.23 per cent returns in just 22 weeks in the recent rally. Interestingly, this is exactly 60 per cent of the time, when it fell from the prior lifetime high. The general rule of the double bottom is that after meeting 100 per cent of the target, it will retrace at least 38 per cent of the upswing in the short term and retrace back to Rs 563 to 515. At this level, one can accumulate the stock for medium to long term.
✓ The stock is meeting all most all CANSLIM characteristics. Its relative strength is high as 94 and its EPS strength is at 94. The greater buyers demand indicates an institutional interest in this stock.With 21 per cent return on equity, reasonable earning stability makes the stock attractive to accumulate.
✓ Buy this stock at Rs 561 with a stop loss of Rs 530. The target is placed at Rs 600- Rs 620.s 530.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Dabur India Ltd at Rs 517.90 in issue no. 20 (dated March 9, 2020). Post our recommendation, the stock did not sustain at higher levels since a selling pressure emerged in the market and the stock slipped below the stop-loss level. We recommend our readers to exit with a loss. We exited the stock at Rs 486 on March 9, 2020.