Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : The benchmark index had lost about 119 points or 1.30 per cent during the last three trading sessions. After closing above 9,000 mark on last Thursday, Nifty traded in sideways manner on Monday due to a truncated week and lack of any major triggers. On Monday, Nifty formed an inside bar as well as NR7 bar. This formation indicates a compression in volatility or a period of rest. And, as per the principle of contraction/ expansion, a contraction in volatility is usually followed by expansion in the volatility and this principle of contraction/expansion was clearly visible on Wednesday. On Wednesday, Nifty recorded a range of 387 points as compared to 199 points in the previous session.
 
On Wednesday, Nifty managed to move above the swing high of April 8 at 9,132 level and registered a fresh swing high of 9,261. But, it failed to sustain at higher levels because of the selling pressure in second half of the trading session. As a result, Nifty formed a bearish engulfing candlestick pattern on Wednesday. Bearish engulfing candlestick was followed up with a gap down opening on Thursday but Nifty took support around 38.2 per cent retracement of the recent rally and managed to recover from its lows and closed near the day’s high. So, what we are witnessing currently is a tussle between the bulls and the bear. The bulls are not letting the price to drop below 8,800 mark whereas, on the flipside, bears are not leaving bulls to breathe comfortably at higher levels.

We believe that on the upside, the index is clearly struggling to close above 9,132 level and until Nifty manages to close above this level, we may not see a fresh leg of upmove. While, managing to close above this, Nifty may scale up to the levels of 9,400-9,500 in the short-term while, on other hand, the level of 8,800 is a crucial support for the index as long as the bulls manage to defend this support. Hope for a pullback rally to continue is likely to persist. Nifty index has almost witnessed a rally of 20 per cent from the lower levels. Even after over 20 per cent rally from bottom; the 20-DMA is still in a falling trajectory.

For the coming week, the level of 9,132 on the upside and on the downside, the level of 8,800 are key levels to watch out and this 332 point range may not give clear trading opportunities for intraday players. Break on the either side of range would result into a trending move.

NIFTY DERIVATIVES: Nifty Futures lost 26.70 points or 0.29 per cent since the last weekly expiry. Indian Volatility Index (VIX), a gauge for market’s short-term expectation of volatility, dipped by 7.34 per cent to end at 46.09. For the next weekly expiry, open interest wise put-call ratio (PCR) is at 1.13. For April monthly series, PCR is at 1.29.

For the next weekly expiry, highest call open interest is at 9,500 strike with 5,78,400 OI. On the put side, 8,000 strike has 7,76,925 open interest, which is the highest. The 9,500 call of the next weekly expiry today has seen a new addition of 3,51,600 open interest. Also, in 9,000 call, we have seen a new addition of 3,84,900 OI. On the put side, 8,000 put has seen a new addition of 4,76,025 open interest. For the next weekly expiry, the total call open interest is 47,36,550 and the put open interest is 53,58,600. For April monthly series, the highest call open interest is at 10,000 strikes with 17,03,925 OI, followed by 9,500 strikes with 15,75,300 OI. On the put side, the highest put open interest is at 8,000 strikes with 25,58,100 OI. The current derivative data suggests that the Max Pain is at 9,000. 

TECHNICAL RECOMMENDATION-STOCK STRATEGY        

COROMANDEL INTERNATIONAL LTD. ............... BUY ......... CMP Rs 565.85

BSE Code ...... 506395     Target 1 .... Rs 610 | Target 2 .... Rs 625 | Stoploss.... Rs 520

✓Current Observation: Coromandel International Limited, India’s second-largest phosphatic fertiliser player, is in the business segment of fertilisers, speciality nutrients, crop protection and retail. The company manufactures a wide range of fertilisers and markets around 4.5 million tonnes thereby, making it a leader in its addressable markets.

✓ The stock had formed a reversal bearish engulfing like candlestick pattern as on the weekend of February 20, 2020 and thereafter, entered into a corrective phase. The correction is halted near 61.8 per cent Fibonacci retracement level of its prior upward move (Rs 336.60-Rs 642) and it coincides with 100-week SMA.

✓ At present, the stock has given a downward sloping trendline breakout. This breakout is confirmed by strong volumes. Along with this trendline breakout, the stock has also managed to close above its 20-day EMA, 50-day EMA and 100-day EMA.

✓ Among the momentum indicators, the 14-period daily RSI is currently quoting at 53.56 and it is trading above its nine-day average. The daily MACD stays bullish as it is trading above zero line since the last seven trading sessions.

✓ Hence, we recommend buying this stock for a target price of Rs 610, followed by Rs 625, with a stop-loss at Rs 520 level on closing basis. 

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Sudarshan Chemical Industries Ltd at Rs 421.05 in issue no. 25 (dated April 13, 2020). Post our recommendation, the stock has been witnessing a consolidation along with 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 390 on closing basis, as the stock is likely to move higher from the current levels.