Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : In our last article, we had mentioned about the relevance of 10,250 -10,300 as a resistance zone. On June 8, Nifty marked a high of 10,328.50 and with this; it almost filled the gap March 12. Also, it found resistance around this zone and began to slide lower. From the last Thursday closing to this Thursday close, Nifty has lost 1.26 per cent and it has slipped below its important psychological 10,000 mark.

One of the key observations during the week was that Nifty resisted twice in the past four trading sessions from its sliding 100-DMA. After registering a swing high of 10,328.50, Nifty has formed lower highs. On June 10, Nifty formed an inside bar as the price traded within the high-low range of the prior bar, also it was a NR7 bar as the range was confined to 112 points lowest in the last seven bars. Formation of this pattern clearly indicated a contraction in range and Thursday’s session played out as a perfect text book rule. We saw range contraction, followed by range expansion, as Nifty formed a sizable bearish bar with 227 points range.

Nifty has now closed below the eight-DMA and also, closed below the low of June 4. Now going forward, the level of 9,800 is an immediate support level as it is 38.2 per cent retracement of the recent rise. Followed by June 1 gap area, this could act as an important short-term support.

On the upside, the 100-DMA (10,230) is likely to act as a strong hurdle. Only a move above this level could help the index to reclaim its recent swing highs. Our advice to the traders would be to follow proper risk management rules as we might see a volatility rearing its ugly head again.

NIFTY DERIVATIVES: Nifty Futures lost 121.65 points or 1.21 per cent since the last weekly expiry. For the next weekly expiry, open interest wise put-call ratio (PCR) is at 0.81. For June monthly series, PCR is at 1.38.

For the next week expiry, highest call open interest is at 10,500 strike with 14,04,600 OI. On the put side, 9,500 strike has 11,59,725 open interest, which is the highest. The highest addition in open interest was seen at 10,500 call of the next weekly expiry with 8,54,250 OI and on the put side, 9,000 put has seen the highest addition in open interest with 7,78,800 OI. For the next week expiry, the total call open interest is 1,15,28,325 and the put open interest is 93,21,150.

For June monthly series, the highest call open interest is at 10,000 strikes with 21,52,050 OI, followed by 10,500 strikes with 20,26,950 OI. On the put side, the highest put open interest is at 9,000 strikes with 36,17,575 OI. The current derivative data suggest that Max Pain is at 10,000 for the monthly expiry.

TECHNICAL RECOMMENDATION

STOCK STRATEGY

​SUN PHARMACEUTICAL INDUSTRIES LTD ................ BUY ........ CMP Rs 495 

BSE Code ...... 524715 | Target 1 .... Rs 530 | Target 2 .... Rs 540 | Stoploss.... Rs 466

Current Observation: IOLCP is India's one of the leading generic pharmaceutical company and is a significant player in the organic chemicals space. IOLCP has a wide presence across various therapeutic categories like, pain management, anti-diabetic, anti hypertensive, anti-convulsants, etc.
✓ Technically, the stock has formed a reversal spinning bottom candlestick pattern as on the weekend of March 27, 2020 and thereafter, bounced sharply up to its all-time high level.
✓ Recently, the stock has witnessed a minor correction and during this correction, the stock has formed a strong base around 20-Day SMA level.
✓ The stock is meeting Daryl Guppy’s multiple moving averages set up rules as it is trading above both the short and long-term moving averages.
✓ Relative strength index (RSI), which is a momentum indicator in the daily timeframe, bounced from 60-mark and in the bullish trend, we have seen that the RSI does not move below 60-mark.
✓ Hence, we recommend buying this stock for a target price of Rs 440, followed by Rs 450, with a stop-loss at Rs 384 level on closing basis.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Sun Pharmaceutical Industries Ltd at Rs 495 in issue no. 33 (dated June 08, 2020). Post our recommendation, the stock moved higher in-line with our expectation and went on to touch the level of around Rs 512.70. We had given a ‘book profit’ message at the level of Rs 511.70 through our SMS service on June 09, 2020. Thus, investors, who had taken positions according to this strategy, would have made decent profit.