Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
Nifty closed above the multiple parallel highs of the recent past. It closed at a new lifetime high. It gained 196.3 points or 1.25 per cent in the last five trading sessions and settled at 15,924.2. This low volume breakout will have a low probability of success. Finally, Nifty has broken out of the 22-day flat base with a renewed bullish bias. It opened with a positive tone and broke out of the flat base after an hour of trading. This decisive, strong bullish candle has put an end to wavering moves.
It closed above the upper Bollinger band and also, above the upward resistance. As we had mentioned earlier, if the test of resistance occurs more than six times, it results in a breakout. This is what exactly happened on Thursday. Now, it needs to register a follow-through day with closing above today's high or in pos-itive territory. The RSI moved above the prior swing high and broke the double bottom pattern, which is a positive sign for the market. In any case, if the follow-through day turns into reality on Friday, the MACD is likely to give a fresh buy signal. The weekly candle moved above the previous week's high.
A weekly closing above the 15,915 level after five weeks of tight consolidation is a big positive for the market. The broader market participation is another good indication of a bullish trend. As the 22 day-tight consolidation has broken, expect a sharp retracement on the upside towards 16,200 and above. However, as Nifty declined in the last hour, it’s giving a sense of profit booking at higher levels. Though it closed above the prior swing highs, the sharper retracement is missing. For now, be with a positive bias as long as it makes higher highs. In any case, we need to be cautious on the long positions if it fails to close in the positive territory on Friday.
NIFTY DERIVATIVES:
Nifty Futures gained 204.6 points or 1.30 per cent in the last five trading sessions. It closed above the prior highs. The future volume is declining for the past five days. The index is up by 0.44 per cent while the 5.83 per cent increase in the open interest shows a long buildup in the market. The put-call ratio (PCR) moved to 1.44 from 1.31 last week. Even for the next weekly expiry, the PCR is higher at 1.15, which indicates that the price has a limited upside move. The implied volatility is still at the lower band of 10-11 zone. India VIX declined to 12.27 from 13.56 during the past five trading sessions. As the volatility declined to a lower, the options premiums are not at attractive levels.
The total call open interest for the next weekly expiry is 2,36,027 while the total put open interest is at 2,70,982. For the monthly series, the total call open interest is 3,94,402 and the total put open interest is 5,70,059. July 22 series has seen a long build-up on the call side. The 16,200 strike has the highest open interest of 29,672, followed by 16,000 strikes with 26,754 OI. The 16,500 and 16,100 strikes also have 21,743 and 22,708 open interest. On the put side, 15,800 strike has the maximum open interest of 34,422, followed by 15,900 strikes with 32,271 OI. The 15,700 strike has an OI of 22,636. The 15,950 and 16,150 strikes show the highest increase in open interest. Max Pain for the next weekly series is at 15,900 while the VWAP is at 15,932.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
INDIAN ENERGY EXCHANGE LIMITED.................BUY ................... CMP Rs 409.20
BSE Code : 540750
Target 1 : Rs 440
Target 2 : Rs 450
Stoploss : Rs 385 (CLS)
Current Observation:
✓Indian Energy Exchange Limited is the country’s premier energy marketplace, providing a nationwide automated trading platform for the physical delivery of electricity, renewables, and certificates. IEX has pioneered cross-border electricity trade, expanding its power market beyond India to create an integrated South Asian power market. The state-of-the-art and customer-powered company-centric technology enables efficient price discovery and facilitates power procurement.
✓ Technically, the stock broke out of a nine-week cup pattern in Stage-2 with higher volume. The relative price strength is at 64 and moved above the prior high, which indicates improved strength. The stock is trading above all the short and long-term moving averages. The stock is trading 8 per cent above the 50-DMA and 30 per cent above the 200-DMA. The weekly MACD is about to give a buy signal. The RSI is in a super bullish zone. The ADX (33.5) is showing a better trend strength. The +DMI is above the -DMI.
✓ The weekly Heikin-Ashi candle turned green, indicating a bullish bias. In short, the stock has broken out of the bullish pattern. A sustained move above Rs 414 is positive, and it can test the level of Rs 440, followed by Rs 450 in the short term. Maintain a stop-loss at Rs 385.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Deepak Nitrite Ltd at Rs 1,935.10 in issue no. 38 (dated July 12, 2021). Post our recommendation, the stock witnessed con-solidation along with below-average volume. Currently, it is hovering around our recommended price. However, we can expect to see smart upmoves if it closes above Rs 2,000 level. We would advise our readers to hold this stock with a stop-loss of Rs 1,747 on a closing basis, as the stock is likely to move higher from the current levels.