Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
After huge volatility of 518 points, Nifty made a new lifetime high twice during the week. It made a new lifetime high last Friday but declined 467 points in just two days. However, it recovered in the last three days to make a new high. Indian equities reacted positively along with global markets at US Federal Reserve neu-tral policy stance. Since the last weekly expiry close, Nifty has gained by 193.45 points or 1.1 per cent.
Technically, the benchmark index has no resis-tance for now, as it reached uncharted terri-tory. The supports are inched up by 17,326 or at least the previous bar’s low of 17,646. Barring Wednesday, all the other four days had experienced over 200 points of volatility. This increased volatility may continue hereafter. On a lower time frame, the index has formed a cup formation, which is bullish. In any case, if Nifty closes above the 17,865 level, it can touch the levels of 18,013 and 18,197, which have the highest probability. A strong bullish weekly candle shows the bull's strength. The RSI and other indicators reached an overbought condition again. The RSI may continue to be in the zone of 70-80 for the near future. Only a move below 65 will give us clues for the negative bias. The daily MACD is about to give a fresh buy signal while the weekly momentum has increased for the last five weeks. The 20-DMA (17,315) and Tuesday's low (17,326) are at the same level. There is no change in the current bull trend in any timeframe. However, VIX, which is at a three-month high, is a disturbing fact for the trend. As mentioned earlier, follow the trend with extreme caution and strict stop-losses.
NIFTY DERIVATIVES:
Nifty Futures have gained 231.85 points or 1.31 per cent in the last five trading sessions. It closed at the highest level of the week. Interestingly, in this entire rise, the volume declined significantly. The open interest is almost flat, declining by 0.80 per cent. In fact, Bank Nifty increased by 2.26 per cent, but the open interest declined by 4.52 per cent. This indicates that the market rally was because of the short covering. India VIX rose by 15.2 per cent to 16.6 from 14.41. The implied volatility (IV) also rose to 13.60; it’s probably the reason why option premiums have become expensive after a long time. The rollovers are yet to pick up as the monthly series is just five sessions away. Currently, the rollovers are 15.78 per cent. The PCR is at 1.33, declining from 1.58.
The total call open interest is at 8,17,572 while the total put open interest is at 10,83,547. The maximum call open interest is at 18,500 strikes with 70,577 OI, followed by 18,000 strikes with 70,358 open interest. At-the-money strike 17,800 strike has 50,649 OI. On the put side, deep-out-of-the-money strikes 17,000 and 16,500 strikes have an open interest of 84,254 & 77,180, respectively. The 17,500 strike also has a higher open interest of 66,196, followed by 17,600 strikes with 60,225 OI. The 17,750 to 18,150 strike calls have seen a long build-up while the 17,700 to 17,450 strikes witnessed a short covering. The 17,850 strike call has seen a 385 per cent increase in the open interest. On the put side, there is a huge short covering across the strikes. The 17,850 strikes put have seen the highest open interest increase of 2,532 per cent. Max Pain for the monthly expiry is at 17,600. Meanwhile, the VWAP is at 17,757.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
BIRLASOFT LTD ..........BUY .......... CMP Rs 439.85
BSE Code : 532400
Target 1: Rs 480
Target 2 : Rs 500
Stoploss : Rs 405(CLS)
Current Observation:
•Birlasoft Limited is engaged in digital technologies. This CK Birla Group company caters to the automotive, banking, manufacturing, insurance as well as media & entertainment sectors with its digital solutions.
• Technically, the stock has been forming a flat base for the last nine weeks. Its relative price strength is fairly at 68. The stock is currently trading at the prior pivot level. It is trading above the key moving averages. The stock is trading 7.21 per cent above the 50-DMA and 6.17 per cent above the 20-DMA. As the stock has been consolidating for the past nine weeks, its short-term moving averages have flattened. The weekly ADX (55.39) is above the directional movement indicators and shows strong trend strength. The RSI (71.23) is in a strong bullish zone. The Elder impulse system has given a buy signal on the weekly as well as the daily time frames. The stock is well above the anchored VWAP support. In the last two days, the volume has increased and also, shows the demand for the stock from institutions. The stake in the company has increased by 5.35 per cent in the last quarter.
•In short, a move above Rs 442 will register a breakout. It can test Rs 480 in the short term while the medium target is at Rs 500. Maintain a stop-loss at Rs 405.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Cyient Ltd at Rs 1,100 in issue no. 48 (dated September 20, 2021). Post our recommendation, the stock witnessed a minor correc-tion along with below-average volume. On Tuesday, the stock had taken support near the 13-day EMA level and resumed its upward journey. However, we can expect to see a smart upmove if it closes above the Rs 1,115 level. We would advise our readers to hold this stock with a stop-loss of Rs 1,020 on a closing basis, as the stock is likely to move higher from the current levels.