Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Thursday’s session was the seventh successive session in a row, in which the index formed an indecisive bar. The market opened with positive bias but repeated the same what’s already going on for a while now. For almost a week, the market opens higher and after an initial upward stride, it slips from the top to end the session almost near to open or below the open.
Since last Thursday close to this Thursday, Nifty has gained almost 100 points but the daily spread, which is the difference between the high and low, has been consistently below the 10-day average, thereby clearly indicating a compression in the price.
In the last four trading sessions, the index has been trading in a narrow range of 11,238-11,373. Multiple attempts have been made to cross the hurdle of 11,340-11,380 but in vain. So, for the immediate nearterm, the range of 11,238-11,373 is a crucial range to watch out for. Further, Bollinger band on the lower timeframe i.e. 60 minutes has contracted and this has led to a formation of a squeeze. Hence, traders should wait for a break of the range on either side for their next trending move. As long as Nifty oscillates in this narrow range, there are no clear trading opportunities available for the day traders in the index.
On breach of 11,238 levels on the downside, Nifty might slip towards the zone of 11,157-11,128. This zone is the next important support zone as this confluence of 20-DMA and 50 per cent retracement level of the recent upswing.
On the upside, a close above 11,380 would result in a fresh breakout and it may take the index towards the levels of 11,500-11,600 in the near term.
We would advise the traders to wait for a resolute break of the range and create a position accordingly because once we see a break of this range, the move is going to be fast and ferocious in nature.
NIFTY DERIVATIVES : Nifty Futures gained 123.95 points or 1.06 per cent since the last weekly expiry. For the next weekly expiry, an open interest wise put-call ratio (PCR) is at 1. For August monthly series, PCR is at 1.49.
For the next weekly expiry, the highest call open interest is at 12,000 strike with 13,75,125 OI. On the put side, 10,400 strike has 13,99,200 open interest, which is the highest. The highest addition in open interest was seen at 12,000 call of the next weekly expiry with 9,43,500 OI and on the put side, 10,400 put has seen the highest addition in open interest with 9,20,100 OI. For the next weekly expiry, the total call open interest is 1,21,33,200 and the put open interest is 1,21,67,925.
For August monthly series, the highest call open interest is at 11,500 strikes with 23,85,000 OI, followed by 12,000 strikes with 17,89,575 OI. On the put side, the highest put open interest is at 11,000 strikes with 32,87,850 OI. The current derivative data suggest that the Max Pain is at 11,200 for the monthly expiry.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
DYNEMIC PRODUCTS LTD .................... BUY ...................... CMP Rs 221.75
BSE Code ...... 532707 | Target 1 .... Rs 236 | Target 2 .... Rs 240 | Stoploss.... Rs 208
✓Current Observation: Dynemic Products Limited is one of the largest global manufacturers & exporters of food colours in the world, offering a wide range of food colours, lake colours, blended colours, USFDA certified FD&C colours & dye intermediates from India.
✓The stock, after registering the high of Rs 224.95 as on July 28, 2020, witnessed a minor correction. The correction is halted near 50 per cent retracement level of its prior upward move (Rs 167-Rs 224.95) and it coincides with the 13-day EMA level. Currently, the stock has formed a good base around the level of Rs 196.50-Rs 199.50 and initiated its northward journey.
✓The positive crossover on the 14-period daily RSI supports the overall bullish price structure. Further, in the recent corrective phase, the RSI has never breached its 60 mark, which indicates that the stock is in a super bullish range as per RSI range shift rules. The stock is meeting Daryl Guppy’s multiple moving averages set up rules as it is trading above both the short and longterm moving averages.
✓The average directional index (ADX), which shows the trend strength, is as high as 47.53 on a daily chart and 35.32 on a weekly chart. Generally, the level above 25 is considered as a strong trend. In both the timeframes, the stock is meeting the criteria.
✓ Hence, we recommend buying this stock with a stop-loss of Rs 208 on a closing basis for a target of Rs 236-Rs 240 in the short-term.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Aegis Logistics Ltd at Rs 213.30 in issue no. 42 (dated August 10, 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 195 on a closing basis, as the stock is likely to move higher from the current levels.