Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
The equity market bounced back after a day of breather. On Thursday also, it gained almost one per cent. Nifty closed at a record high of 17,234.15 with a 157.90 points gain. Barring auto and PSU banks, all other sectoral indices par-ticipated in the rally.
The benchmark index scaled to new highs almost in all the last five trading sessions. With a small profit booking on Wednesday, the index closed in the negative territory. During the last five trading sessions, it gained 597.25 points or 3.59 per cent with the help of two massive days of a 200-point rally. It registered very strong gains in four out of five days. It formed another higher high & higher low bar today. This shows a strong uptrend. Nifty extended and almost met our earlier target of 17,265. The weakness is limited to just one day wherein, it registered a new high close. The leading indicator i.e. RSI has reached above 80 zone after January 2021, indicating that the index is extremely overbought. At the same time, the index is closing above the Bollinger upper band for the fourth consecutive session. It has come into the bands in the next two to three sessions. The index is now 3.84 per cent above the 20-DMA, which is also showing an extension of an upmove. After this whopping move, as a rule, it may enter into a consolidation. It does not mean that the market will correct significantly as there is no weakness on any timeframe. Only in case of closing below the prior bar low, book the profits and wait for a fresh entry.
NIFTY DERIVATIVES:
Nifty Futures advanced 625 points or 3.76 per cent during the last five trading sessions. Today's new high closing was seen on the back of low volume. The index closed above the previous day’s high. The open interest is up by 5.63 per cent. Currently, the monthly put-call ratio (PCR) is at 1.46 while the next week's PCR is at 1.16. Currently, the at-the-money implied volatility is at 11.91. With the impulse moves, the neutral strategies closed with the losses.
For the next weekly expiry, the total call open interest is at 4,54,855 while the total put open interest is at 5,28,802. The deep-out-of-the-money strike 18,000 has a maximum open interest of 55,316, followed by an out-of-the-money strike of 17,500 strike with 44,580 OI. The 17,200 strike has an open interest of 40,377. On the put side, the maximum open interest is at 16,500 strikes with 56,330 OI, followed by 17,000 strikes with 49,606 OI. The 17,200 strikes also have a higher open interest of 46,208. On the call side, 16,900 to 17,100 strikes witnessed short-covering while 17,150 to 17,650 strikes have seen long build-up. On the put side, a huge short build-up was witnessed. The 17,650 strikes call open interest increased by 577 per cent. The 17,250 strikes put open interest increased by over 1,000 per cent. For the next weekly expiry, the 17,100-17,200 will act as crucial support for the market. Max Pain is at 17,200 while the VWAP is at 17,191.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
PIDILITE INDUSTRIES LTD ..........BUY .......... CMP Rs 2,341.95
BSE Code : 500331
Target 1: Rs 2,465
Target 2 : Rs 2,534
Stoploss : Rs 2,235 (CLS)
Current Observation:
• Pidilite is a consumer-centric company, which manufactures and markets adhesives, sealants, waterproofing solutions as well as construction chemicals for arts & crafts, industrial resins, polymers, and more. Its product portfolio is as diverse as it is ever-evolving. The company began its journey with its flagship brand, Fevicol. Currently, it has 19 brands in its portfolio. The company has recently acquired a 100 per cent stake in one of the Indian subsidiaries of Huntsman Group (USA) for Rs 2,100 crore. It is planning to have 12 additional plants in India by the end of 2022 to create a seamless network across the country.
• Technically, the stock has broken out of a six-week flat base with an above-average volume. Its relative price strength is improving and is at 52. The stock is trading 4.39 per cent above the 20-DMA and 4.34 per cent above the 50-DMA. It also closed above the anchored VWAP. Besides, Pring's KST has given a fresh buy signal. The MACD histogram shows an increase in bullish momentum. The 20-period RSI took support at 50 zone and is bouncing. It has broken out of two prior swings and entered into a strong bullish zone. The ADX (23.49) is showing improving trend strength. The +DMI is much above the -DMI.
• As the stock is breaking out of a tight weekly base, expect a sharper move on the upside. A weekly close above Rs 2,334 is positive and can test Rs 2,465 in the short term. The medium-term target is placed at Rs 2,534. Maintain a stop-loss at Rs 2,235.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Reliance Industries Ltd at Rs 2,230.65 in issue no. 45 (dated August 30, 2021). Post our recommendation, the stock moved higher in line with our expectations and went onto touch the level of around Rs 2,307.80. We had given a ‘book profit’ message at the level of Rs 2,305.10 via our SMS service on September 02, 2021. Thus, investors, who had taken positions according to this strategy, would have made a decent profit.