Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :Nifty continued its northward journey at a snail’s pace and registered gains of 247.05 points or 2.18 per cent from last Thursday’s close to this Thursday. On Thursday, for the fifth consecutive session, the index has formed higher high and higher lows, suggesting that supports have shifted higher.
The banking stocks seem to have finally joined the party and helping Nifty to aim higher. The banking benchmark index has gained over 1,600 points or 7.27 per cent in the last five trading sessions. Nifty Mid-Cap and Small-Cap has also registered gains of 2.18 and 4.92 per cent, respectively.
One interesting takeaway for bulls is that on August 21, 2020, Nifty index has formed a ‘golden crossover’ pattern, which is considered as a long-term bullish sign. In technical parlance, golden crossover occurs when a short-term 50-day simple moving average crosses above the long-term 200-day simple moving average on any indices or stocks. Interestingly, along with Nifty index, Nifty Mid-cap index has also witnessed golden crossover and Nifty Small-cap is on the verge of giving a crossover.
Going ahead, as long as the sequence of higher highs and higher lows continue, the uptrend remains intact. The short-term supports are shifting higher in the zone of 11,380-11,350 level as it is the confluence of upward sloping trendline support and short-term 13-day EMA level.
On the upside, the zone of 11,660-11,680 is a crucial resistance for the bulls to continue the rally. If it is unable to surpass this level, then there are chances of entering into a corrective to sideways phase. Any sustainable close above 11,680 is likely to open up gates for a bigger target of 12,000 levels as no meaningful resistance is placed between 11,680 and 12,000 level.
NIFTY DERIVATIVES: Nifty Futures has gained 467.35 points or 4.21 per cent in August monthly series. For the next weekly expiry, an open interest wise put-call ratio (PCR) is at 1.27. For September monthly series, PCR is at 1.41.
For the next weekly expiry, the highest call open interest is at 12,000 strike with 15,43,125 OI. On the put side, 11,500 strike has 18,61,200 open interest, which is the highest. The highest addition in open interest was seen at 12,000 call of the next weekly expiry with 12,08,400 OI and on the put side, 11,500 put has seen the highest addition in the open interest with 7,17,075 OI. For the next weekly expiry, the total call open interest is 1,27,16,775 and the put open interest is 1,61,19,675.
For September monthly series, the highest call open interest is at 12,000 strikes with 19,70,625 OI. On the put side, the highest put open interest is at 11,000 strikes with 27,85,650 OI, followed by 11,500 strikes with 21,54,225 OI. The current derivative data suggest that the Max Pain is at 11,500 for the monthly expiry. After assessing the open interest data, we believe that Nifty is likely to trade in the range of 11,500-12,000 in the next couple of trading sessions
TECHNICAL RECOMMENDATION
STOCK STRATEGY
BAJAJ HOLDINGS & INVESTMENT LTD ........ BUY .......... CMP Rs2853.70
BSE Code ...... 500490 Target 1 .... Rs3,070 | Target 2 .... Rs3,150 | Stoploss.... Rs2,670
✓ Current Observation: Bajaj Holdings & Investment Limited (BHIL) is an India-based holding and investment company. The company focusses on earning income through dividends, interest, and gains on investments held. Its fixed-income portfolio includes government securities, certificate of deposit (CD) and commercial paper (CP), corporate bonds as well as mutual funds. Its equity investments include strategic/group investments. Bajaj Auto Holdings Ltd (BAHL) is a subsidiary of Bajaj Holdings & Investment Limited.
✓ Technically, the stock has given a ‘symmetrical triangle’ breakout on the daily timeframe. Along with the triangle breakout, the stock has also managed to close above the upper Bollinger band and started the band walk, which is a very bullish sign.
✓ Further, since the last three trading sessions, the volume is above the 50-day average, which is a sign of accumulation. Currently, the stock is trading above its long and short-term moving averages.
✓ The stock's relative strength index (RSI) has reached its highest value in the last 14-days, which is bullish. Also, it has managed to close above the 60 mark after a span of almost 34 trading sessions. The momentum indicator MACD line has crossed above the signal line, which resulted in the histogram turning positive.
✓ Considering all the above factors, we recommend buying this stock with a stop-loss of Rs 2,670 on a closing basis for a target of Rs 3,070-Rs 3,150 in the short to medium-term.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Gujarat Narmada Valley Fertilizers & Chemicals Ltd at Rs 182.80 in issue no. 44 (dated August 24, 2020). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of around Rs 197. We had given a ‘book profit’ message at the level of Rs 192.85 through our SMS service on August 21, 2020. Thus, investors who had taken positions, according to this strategy, would have made a decent profit.