Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY :

After trading within the high low range of May 18 bearish belt hold candle for the past five trading sessions, Nifty resolve out the range with a sizable bullish candle on Wednesday. It also recorded its highest single day gain for the month of May on the same day.

Over the last one month or so, what was missing in the markets was a follow-through action post a sizable bullish candle. However, this time, we have seen a follow-through action on Thursday and Nifty touched almost 9,500 mark.The market breadth was also in favour of advancers on Wednesday and Thursday. With a strong upmove of over five per cent from Wednesday’s low in the last two trading sessions, Nifty has retraced more than 78.6 per cent of down move, which began on May 13.

Nifty has managed to close above the bearish island, the gap of which was formed on May 14. On the daily chart, Nifty is now trading comfortably above 20 and 50 daily moving average. Going ahead, the high of May 13 session (9,584.50) is likely to act as a strong barrier for the bulls. In case Nifty moves above this resistance levels, it may try to fill the gap of bearish island gap, which was formed on May 4 (9,731.5-9,533.50).

Meanwhile, on the downside, an immediate support is seen around 9,350-9,450 region. The short-term trend remains in favour of the bulls and we advise a buy on dips strategy for now. As long as Nifty trades above 20-DMA, shorting is bad for the time being unless, Nifty closes below the prior bar low.

NIFTY DERIVATIVES:

Nifty Futures gained 415.65 points or 4.58 per cent since the last weekly expiry. For the next weekly expiry, open interest wise put-call ratio (PCR) is at 1.22. For June monthly series, PCR is at 1.37.

For the next week expiry, highest call open interest is at 9,500 strike with 9,93,450 OI, followed by 9,400 strike with 8,00,025 OI. On the put side, 9,000 strike has 10,41,075 open interest, which is the highest. The highest net addition in open interest was seen at 9,400 put of next week expiry with 8,22,750 OI and on the call side, 9,500 call has seen the highest net addition in open interest with 4,26,525 OI. For the next week expiry, the total call open interest is 65,66,775 and the put open interest is 79,99,650.

For June monthly series, the highest call open interest is at 10,000 strikes with 18,37,200 OI, followed by 9,500 strikes with 14,61,975 OI. On the put side, the highest put open interest is at 9,000 strikes with 22,36,000 OI. The current derivative data suggest that Max Pain is at 9,500 for the monthly expiry.

TECHNICAL RECOMMENDATION 

STOCK STRATEGY

PI INDUSTRIES LTD .................................. BUY ................. CMP Rs 1591.10

BSE Code ...... 523642 | Target 1 .... Rs 1700 | Target 2 .... Rs 1720 | Stoploss.... Rs 1490

✓Current Observation : PI Industries is a holding company, which manufactures agrochemicals, plant nutrients and plant protection, speciality fertilisers and hybrid seeds.
✓After registering a high of Rs 1,604.70, the stock has witnessed a minor correction. The correction is arrested near 23.6 per cent retracement level of its prior upward move (Rs 970.10-Rs 1,604.70) and coincides with 50-day EMA.
✓The major trend of the stock is bullish as it is trading above its weekly pivot and above its long and short-term moving averages, i.e. 20-day, 50-day, 100-day and 200- day EMAs and these moving averages are exactly in an ascending order, which suggests that the trend is strong.
✓The leading indicator, 14-period daily RSI, is currently quoting at 61.89 and it is in a rising trajectory. The daily MACD stays bullish as it is trading above its zero line and signal line.
✓Hence, we recommend buying this stock for a target price of Rs 1,700, followed by Rs 1,720, with a stop-loss at Rs 1,490 level on closing basis.

REVIEW OF STOCK STRATEGY 

We had recommended our readers to buy the stock of Cadila Healthcare Ltd at Rs 344.35 in issue no. 31 (dated May 25, 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 parameter of the stock still looks promising. We would advise our readers to hold this stock with a stop-loss of Rs 325 on closing basis, as the stock is likely to move higher from its current level.