Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
Nifty is finally showing reversal signs. Three consecutive Doji candles initially indicated exhaustion in the trend. The last two days of decline and closing at the week's lowest point confirmed the bearish implications of Doji at a lifetime high.
As Steve Nison's candlestick principle, Doji candle at a lifetime high requires a close below it for a bearish implication. Nifty is approaching the 20-DMA sup-port of 15,578, which is just 0.73 per cent away. The recent low is at 15,666. This zone of support is important for Nifty. A weekly close below this level means that it is closing below the pre-vious week's low. It is another weaker signal for the market. The RSI has already fallen below the prior minor swing low, and it looks like a double top breakdown. The daily MACD has given a fresh sell signal.
Today's fall with a higher volume qualifies for a distribution day. The recovery in the last hour is because of short covering. The long upper shadow candle and a close below the prior low demonstrate the weak-ness in the market. In any case, if it closes below the 15,606-15,566 zone of support on Friday, Nifty will give the first sign of bearishness. In that case, the recent high of 15,901 will become an intermediate top, as long as Nifty trades below it. Be with a positive bias, in case Nifty moves above the prior day high of 15,769. The present price is not conducive to take fresh long positions. It is time to avoid long positions and get ready for positional shorts below the 15600-566 zone of support.
NIFTY DERIVATIVES:
Nifty Futures declined by 70.30 points or 0.45 per cent during the last five days. The last two days’ decline is with higher volume. India VIX moved above 15 after hitting the 13.27 level during the week. The put-call ratio (PCR) declined to 1.05 from 1.63 (last Thursday). As we enter into the last week of June series, the rollovers were seen at 12.27 per cent. The open interest is up by just 0.26 per cent. The implied volatility is at 15.12. Because of low VIX & low IV, the options’ pre-miums are not so attractive.
The maximum call open interest is at 16,500 strikes with 48,731 OI, followed by 15,800 strikes with 48,637 open interest (OI). The 16,000 strikes have an open interest of 47,181 while 15,700 strikes have 39,591 OI. The short build-up was seen from 16,050 to 15,450 strikes. There is a huge call selling happening. On the put side, the maximum open interest is at a deep-out-of-the-money strike of 15,000 with 50,450 OI, followed by 15,500 strikes with 42,346 OI. Even the deep-out-of-the-money strikes 14,500 also have an OI of 41,264. At-the-money strike 15,700 has an open interest of 30,513. The 15,750 strike call saw a 309 per cent increase in the open interest. On the put side, 15,650 strikes witnessed an 84 per cent increase. The Max Pain is at 15,700 for June series while the VWAP is at 15,702.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
BERGER PAINTS INDIA LTD..................BUY ................... CMP Rs 820.40
BSE Code : 509480
Target 1 : Rs 875
Target 2 : Rs 900
Stoploss : Rs 770 (CLS)
Current Observation:
✓Berger Paints registered robust growth in Q4FY21. Its revenue grew by 53 per cent to Rs 2,026.09 crore. PAT went up by 102.2 per cent to Rs 208.60 crore. Despite significant inflationary pressure, the company maintained its gross margin on a YoY basis in Q4FY21. It is expected to post PAT CAGR of 20 per cent and 29 per cent for the next two years.
✓ Technically, the stock has registered an 18-week consolidation breakout. It is trading at a new lifetime high. Because of consolidation, its relative price strength is yet to pick up to the optimal level. The EPS strength is as high as 93. The company's return on equity is at 21 per cent while its institutional holding went up by 0.28 per cent during the last quarter. The stock is above all the short and long-term moving averages, and all of them are trending up.
✓ The weekly MACD histogram shows that there is an increase in bullish momentum. The RSI is in a bullish zone and is just above the prior swing high. The ADX (23.31) shows decent trend strength. The Elder impulse system and Pring's KST have given a buy signal. The stock is above the anchored VWAP resistance too. In short, the stock has recorded a bullish breakout with a decent volume.
✓ Considering the above factors, we recommend buying this stock for a short to a medium-term target of Rs 875-Rs 900 level. Maintain a stop-loss at Rs 770.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Astral Ltd at Rs 1,970.55 in issue no. 34 (dated June 14, 2021). Post our recommendation, the stock witnessed a consolidation along with low volume. Currently, it is hovering around the breakout level. However, we can expect to see some smart upmoves if it closes above the all-time high level of Rs 2,030. We would advise our readers to hold this stock with a stop-loss of Rs 1,880 on a closing basis, as the stock is likely to move higher from the current levels.