Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY :

The benchmark index gained 144.35 points or 0.82 per cent on the weekly derivative expiry. As expected last week, Nifty is consolidating around the 20-DMA. It gained 172.2 points or 0.98 per cent in the last five trading sessions. It climbed 431.7 points from Friday’s low. The daily ranges are higher than earlier, as it moved at least 200 points for four days in the last five trading sessions. After closing below the 20-DMA, the index got bullish confirmation with a gap-up opening on the very next day and closed above the Doji high.

Today, Nifty formed an inside bar as it traded within Wednesday’s range. It does not have any trend change implications. The consolidation may continue between the 20-DMA (17,621) and the previous high of 17,748. Below 17,621, the immediate sup-port is at 17,452, which is Friday's low and can be considered as a minor swing low. Unless the index breaks this range decisively, the market will be in a strong uptrend. The benchmark has not made a lower low. In any case, if Nifty fails to move above Wednesday's high of 17,884 and declines below 17,452, the market structure will change to lower high & lower low, which is a classical minor downtrend. Nifty is still trading below the upward channel for the last five trading sessions. Even on the weekly chart, it is forming an inside bar. The level of 17,452 is again a critical level to get the confirmation for the last week's dark cloud cover. The daily RSI has formed lower highs and lows. The zone of 58-68 is significant for the continuation of the reversal signal. The MACD histogram is still in the negative zone. The Elder impulse system is showing that Nifty is in a neutral zone. Pring's KST has given a bearish signal. The level of 17,885-17,613 is a critical zone for Friday. For the next week, the level of 17,948-17,452 is an important zone. Either side breakouts will give clarity on the trend. Stay cautiously optimistic!

NIFTY DERIVATIVES:
Nifty Futures gained 188.25 points or 1.06 per cent since the last weekly expiry. In today's expiry, it gained 192.80 points or 1.09 per cent. However, the open interest declined by 2.75 per cent, which indicates the long unwinding. The monthly at-the-money implied volatility (IV) is relatively higher at 14.16, which is why the monthly at-the-money option premiums have become costly. After hitting 19.43 during the last week, India VIX declined to 16.16. However, the daily volatility has increased during the week. The put-call ratio (PCR) is at 1.46 i.e. almost at the same level for the past five trading sessions, indicating that there is not much change in the bulls as well as the bears' stance on the market direction.

For the next weekly expiry, the total call open interest is 4,43,070, and the total put open interest is 4,28,112. The maximum call open interest is at-the-money strike of 17,800, which has an OI of 43,676. The deep-out-of-the-money 19,000 and 18,500 strikes have open interest of 39,842 & 30,589, respectively. On the Put side, the at-the-money strike has the highest open interest of 43,218, and the 17,700 strike has an OI of 35,328. The deep-out-of-the-money strike 16,900 has an OI of 38,151. On the call side, shorts were covered in 17,500 to 17,750 strikes. On the put side, a huge short build-up was seen. The 18,150 strike call has witnessed the highest increase of open interest by 297 per cent. The 18,100 put open interest increased by 299 per cent. For the next weekly expiry, Max Pain is at 17,750 while the VWAP is at 17,822

TECHNICAL RECOMMENDATION

STOCK STRATEGY

BHANSALI ENGINEERING POLYMERS LTD...........BUY .......... CMP Rs 206.90

BSE Code :500052
Target 1: Rs 226
Target 2 : Rs 230
Stoploss : Rs 189 (CLS)

Current Observation:
•Bhansali Engineering Polymers Limited (BEPL) is a pioneer in manufacturing international quality Acrylonitrile Butadiene Styrene (ABS). The company has entered into an agreement with Japan's Nippon A&L Inc. (NAL) to expand the business of Styrenics resins and support the sale of ABS resins, AES resins, ASA resins & their alloys with other plastics in the Indian market. The company's customers include automobiles, home appliances, electronics, and healthcare as well as kitchenware industries.
• Technically, the stock is breaking out of an eight-week flat base pattern with an above-average volume. The 40-weekly average is acting as strong support. The 30-weekly average is trending on the upside. The stock is just 8 per cent away from its lifetime high. The relative price strength (RS) is fairly at 60. The weekly ADX (39.06) shows solid trend strength. The RSI (65.81) is in a strong bullish zone. The weekly MACD is about to give a buy signal. It is above the anchored VWAP resistance. The Elder impulse system has given a buy signal.
• In short, the stock has broken out of a bullish pattern and is in the buy zone. Hence, we recommend buying at the current market price with a stop-loss of Rs 189. The short-term target is placed at Rs 226 while the medium-term to long-term target is at Rs 230.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Sun Pharmaceutical Industries Ltd at Rs 818.20 in issue no. 50 (dated October 04, 2021). Post our recommendation, the stock has marked a high of Rs 838.90 and thereafter, wit-nessed a minor correction with very low volume. During the correction, the stock has retested the breakout point and taken support near 13-day EMA. However, we can expect to see a smart upmove if it closes above Wednesday’s high of Rs 824 level. We would advise our readers to hold this stock with a stop-loss of Rs 775 on a closing basis, as the stock is likely to move higher from the current levels.