Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : Nifty ended its four-day winning streak today. After last Thursday's massive fall, Nifty has been moving within the range of last Thursday’s bar. It had made an attempt to cross the 12,020 mark but it failed miserably as huge volatility was witnessed on Wednesday. This was the reason why even on the weekly expiry day, there was not much volatility to be seen as the index consolidated in a range of 116 points, which was less than its 10-day average range.

However, the broader indices outperformed the headline indices with Nifty Mid-cap and Small-cap advancing 0.67 per cent and 1.16 per cent, respectively. Interestingly, Nifty Small-cap index has witnessed a breakout of a symmetrical triangle-like pattern and the 14-period RSI on the daily timeframe entered into bullish territory, while the RSI on the weekly timeframe was in a super bullish range as it had turned up from the 60-mark. Hence, we would advise our readers to look for trading opportunities in stocks from the broader indices, which are breaking out bases and have been outperforming the indices.

Meanwhile, Nifty has formed an indecisive bar on the daily chart. However, if we move to a lower timeframe i.e. the 60-minutes chart, and look at the current pullback, where the index has retraced entire losses of its last Thursday’s massive fall, the range of the bullish candle is not much significant while, the bearish candle is found to be wide in range. Hence, this is the best way to gauge the balance of demand and supply. Further, a triple top formation seen in the 60-minutes chart is not giving much confidence for initiating a bullish position.

All in all, we expect the index to trade in a broad range of 12,025-11,660. The immediate support is placed around the 11,770 level while the immediate resistance is placed in the band of 12,020-12,040. Since Nifty is undergoing a consolidation phase, traders are advised to keep a tab on the broader markets as the latter, especially Nifty Small-Cap Index, looks attractive. Traders would have to wait for some more time to trade in the index as we can expect a trending move, only after this consolidation ends.

NIFTY DERIVATIVES : Nifty Futures has gained 210.20 points or 1.79 per cent since the last weekly expiry. For October monthly series, the open interest- wise put-call ratio (PCR) is at 1.26.

For October's monthly expiry, the highest call open interest is at 12,500 strike with 35,91,750 OI, followed by 12,000 strike with 30,87,225 OI. On the put side, 11,500 strike has 39,77,100 open interest, which is the highest. The highest change in the open interest was seen at 12,500 call of October monthly expiry with 9,73,725 OI and on the put side, 10,500 put has seen the highest change in the open interest with 6,40,350 OI. The total call open interest for October monthly series is 2,99,06,175 and the put open interest is 3,77,24,025. The current derivative data suggest that the Max Pain is at 11,800 for the monthly expiry.

TECHNICAL RECOMMENDATION 

STOCK STRATEGY 

NAVIN FLUORINE INTERNATIONAL LTD ....... BUY ...... CMP Rs 2,141.90 

BSE Code : 532504
Target 1 : Rs 2,260
Target 2 : Rs 2,300
Stoploss : Rs 2,000

✓ Current Observation: Navin Fluorine International Limited is engaged in the chemicals business. The company focusses on fluorine chemistry, producing refrigeration gases, some basic building block fluorides as well as speciality organofluorine. 
✓ Technically, the stock is clearly in a confirmed uptrend by making higher highs and higher lows on a weekly scale. Recently, the stock has marked the high of Rs 2,230 and thereafter, witnessed a minor correction. 
✓ The correction is halted near the 50-day EMA level, where the stock has formed a flat base-like pattern and initiated its northward journey. Interestingly, the upward journey started from the low of Rs 977, where the stock has taken support near the 50-day EMA for seven times. 
✓ 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. The momentum indicator, MACD line has crossed above the signal line, which resulted in the histogram turning positive. 
✓ The leading indicator, RSI, has not breached the level of 60 on a weekly scale since March 2020. Further, in the recent correction, the RSI has bounced exactly from the 60 mark, which indicates that the stock is in a super bullish range as per the RSI range shift rules. 
✓ These technical pieces of evidence indicate a strong upside in the coming days. Traders can buy the stock at Rs 2,141.90 with a stop-loss of Rs 2,000 on a closing basis for an upside target of Rs 2,260, followed by Rs 2,300.

REVIEW OF STOCK STRATEGY 

We had recommended our readers to buy the stock of Siemens Ltd at Rs 1,242 in issue no. 52 (dated October 19, 2020). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of around Rs 1,297.70. We had given a ‘book profit’ message at the level of Rs 1,290.75 through our SMS service on October 20, 2020. Thus, investors, who had taken positions, according to this strategy, would have made a decent profit.