Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty has gained nearly 2 per cent from the period of last Thursday’s closing to this Thursday. In the same period, Bank Nifty surged 2.61 per cent. After surging 10 per cent from June 12 lows to June 24 high, Nifty succumbed to selling pressure on the back of a spike in Coronavirus cases worldwide.
Nifty formed a bearish outside bar and in technical parlance, it is known as bearish engulfing pattern. The formation of bearish engulfing pattern at 61.8 per cent of the downfall of January-March and near 200-EMA, was clearly an alarming sign for the bulls. However, on Thursday, Nifty did not show any sharp follow-through decline after the formation of bearish engulfing candle pattern.
The formation of small body positive candle on Thursday indicates that there is a consolidation on the cards. As long as Nifty trades below 10,553 mark, the trajectory of the index would remain sideways to corrective. During this corrective phase, the level of 10,170 is likely to act as a strong support and in case Nifty closes below this level, it could test its 100- DMA.
On the upside, an immediate resistance is placed at 10,330 levels, followed by 10,553 levels and only a close above this level would reinstate its bullish undertone as Nifty would negate the bearish engulfing pattern.
RSI on the daily timeframe is above 60 mark but it trades below its nine-day period average while, on the hourly timeframe, it bounced exactly from 40-mark but made a double top around 50-mark. On the hourly timeframe, -DI is above +DI and ADX, which indicates bears having an upper hand. Overall, we expect Nifty to be trading in the range of 10,100- 10,450 in the coming week.
NIFTY DERIVATIVES: Nifty Futures has gained 862.45 points or 9.14 per cent in June monthly series. For the next weekly expiry, open interest wise put-call ratio (PCR) is at 0.96.
For July monthly series, PCR is at 1.53. For the next weekly expiry, the highest call open interest is at 10,500 strike with 13,29,525 OI. On the put side, 10,000 strike has 14,11,650 open interest, which is the highest. The highest addition in open interest was seen at 10,500 call of the next weekly expiry with 6,62,250 OI and on the put side, 10,000 put has seen the highest addition in open interest with 6,42,675 OI. For the next weekly expiry, the total call open interest is 1,03,37,025 and the put open interest is 98,80,200. For July monthly series, the highest call open interest is at 11,500 strikes with 18,06,975 OI, followed by 11,000 strikes with 14,73,300 OI. On the put side, the highest put open interest is at 10,000 strikes with 18,61,350 OI. The current derivative data suggest that Max Pain is at 10,300 for the monthly expiry.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
HONEYWELL AUTOMATION INDIA LTD. ............. BUY .......... CMP Rs 30,345
BSE Code ...... 517174 | Target 1 .... Rs 32,500 | Target 2 .... Rs 32,800 | Stoploss.... Rs 28,500
✓ Current Observation: Honeywell Automation India Limited is a leader in providing integrated automation and software solutions, including process solutions and building solutions. It has a wide product portfolio in environmental and combustion control as well as sensing and control and also, provides engineering services in the field of automation and control to global clients.
✓ The stock has formed reversal three inside up candlestick pattern as on March 25, 2020 and thereafter, the stock bounced up to the level of Rs 29,380. Since then, the stock was trading in horizontal channel.
✓ Currently, the stock has given a horizontal channel breakout. With this channel breakout, ADX, which shows the strength of the trend, turned upside and moved above -DI.
✓ The stock has also managed to close above upper Bollinger band and started band walk, which is a very bullish sign.
✓ The major trend of the stock is bullish as it is trading above its long and short-term moving averages. The leading indicator, 14-period daily RSI, is currently quoting at 73.01 and it is in a rising trajectory.
✓ Hence, we recommend you to buy this stock for a target price of Rs 32,500, followed by Rs 32,800, with a stop-loss at Rs 28,500 level on closing basis.
REVIEW OF STOCK STRATEGY
We had recommended buying the stock of Gujarat State Petronet Ltd at Rs 224.65 in issue no. 35 (dated June 22, 2020). Post our recommendation, the stock did not sustain at higher levels and on intraday basis, it slipped below the stop-loss level but on closing basis, it managed to close above the stop-loss level. Currently, the stock is hovering around the upward sloping trendline support and coincides with 50-day EMA level. However, we can expect to see smart upmoves, if it closes above the level of Rs 220. We would advise our readers to hold this stock with a stop-loss of Rs 210 on closing basis, as the stock is likely to move higher from the current levels.