Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : Nifty, which was seen consolidating in the range of 10,194-10,410, had broken this range on Wednesday and on Thursday, it saw a follow-through buying. As a result of this, Nifty closed above 10,500 mark for the first time since early March.

Further, Nifty has closed right at 61.8 per cent retracement of the entire fall from January-March 2020. The 61.8 per cent retracement level is known as ‘golden ratio’. Besides, it has managed to close above 200-EMA, which is a positive sign for the index.

Nifty moved above the recent swing high of 10,553 and made a new swing high of 10,598. Further, it closed near its prior swing high of 10,552, which is a positive indication as this resulted in negation of bearish engulfing pattern found on June 24. Technically, all the factors are currently aligned in support of the bulls. Hence, we would advise the traders to be with a bullish bias.

On the downside, important support for the index is placed at the level of 10,410 and on the upside; immediate resistance is seen at 10,620, followed by 10,750. Traders are advised to continue their long position with trailing stop-loss and not try to take contra trades or short trades as long as Nifty stays above 10,410 mark.

NIFTY DERIVATIVES: Nifty Futures gained 304.45 points or 2.97 per cent since the last weekly expiry. For the next weekly expiry, an open interest wise put-call ratio (PCR) is at 1.26. For July monthly series, PCR is at 1.53.

For the next weekly expiry, the highest call open interest is at 10,600 strike with 16,47,000 OI. On the put side, 10,000 strike has 16,08,675 open interest, which is the highest. The highest addition in open interest was seen at 10,400 put of next weekly expiry with 11,58,375 OI, followed by 10,500 put with 10,39,275 OI and on the call side, 10,600 call has seen the highest addition in open interest with 8,87,925 OI. For the next weekly expiry, the total call open interest is 1,12,79,625 and the put open interest is 1,42,55,925.

For July monthly series, the highest call open interest is at 11,000 strikes with 22,36,125 OI, followed by 11,500 strikes with 22,34,175 OI. On the put side, the highest put open interest is at 10,000 strikes with 30,57,450 OI. The current derivative data suggest that the Max Pain is at 10,400 for the monthly expiry.

TECHNICAL RECOMMENDATION 

STOCK STRATEGY

VOLTAS LTD. ..................................... BUY ......................... CMP Rs 562.25

BSE Code ...... 500575 | Target 1 .... Rs 600 | Target 2 .... Rs 620 | Stoploss.... Rs 533

✓ Current Observation: Voltas Limited is an air conditioning and engineering company. The company is engaged in room air conditioners, contract revenue, commercial refrigeration products and sale of services. The company's segments include electro-mechanical projects and services; engineering products and services; unitary cooling products for comfort and commercial use, among others.
✓ The stock has formed a bearish engulfing candlestick pattern as on June 08, 2020 and thereafter, it witnessed a minor correction. The correction is halted near 38.2 per cent retracement level of its prior upward move (Rs 432.05-Rs 587.50 and coincides with 20-day EMA.
✓ Due to the narrow range, Bollinger Bands have contracted, which indicates an early signal of a bigger move.
✓ On Thursday, the stock has given a downward sloping trendline breakout along with a relatively higher volume.
✓ Currently, the stock is trading above its short and medium-term moving averages, i.e. 20-day EMA, 50-day EMA and 100-day EMA. The leading indicator, 14-period daily RSI, is currently quoting at 60.15 and it is trading above its nine-day average.
✓ Considering the above factors, buy this stock at Rs 562.25 with a stop-loss of Rs 533 on a closing basis for a target of Rs 600- Rs 620.

REVIEW OF STOCK STRATEGY 

We had recommended our readers to buy the stock of Honeywell Automation India Ltd at Rs 30,345 in issue no. 36 (dated June 29, 2020). Post our recommendation, the stock has been witnessing 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 28,500 on a closing basis, as the stock is likely to move higher from its current level.