Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
Nifty has been trading in a sideways direction for the last couple of days but today, it suddenly went into the bear's grip. It declined by more than 350 points on a single day for the first time in the last six months.
On April 12, it had declined by 524 points. Barring Tuesday, it closed on a neg-ative note on all the days. It slipped 320.85 points or 1.77 per cent since the last weekly expiry. The broader market breadth is extremely negative with 1,544 declines and only 445 advances. Only seven out of Nifty 50 stocks could manage to close in the green territory.
During the last five sessions, it took support at 20-DMA on Monday but failed to hold onto it today. On a monthly expiry day, the index opened negatively and broke the rising channel support decisively. The previous week's low of 18,034 also got broken this week. Most importantly, Nifty closed below the prior breakout level of 17,948. The bearish implications got confirmed after a dark cloud cover-like candle last week and the current bar’s closing below the 18,034 level. It also closed below the 61.8 per cent retrace-ment level.
On a monthly chart, Nifty is forming a shooting star candle. The index also broke the 20-DMA support. In fact, Nifty has broken the cluster of supports decisively now. The leading indicator i.e. RSI formed head & shoulders pattern and has broken the neckline today. In any case, if the RSI closes below the zone of 50 on Friday, Nifty will enter into a bearish zone. The negative momentum indicator i.e. -DMI crossed the +DMI after July 19. Today, Nifty has broken the anchored VWAP and 21-EMA. Now, the 50-DMA support is just 1.78 per cent away at 17,544. A small bounce may come but only a strong close above 20-DMA or 18,000 levels will give confidence to the bulls. In the next three weeks, if Nifty fails to move above this month’s high, then the 18,604 level will technically be the intermediate top for the market.
NIFTY DERIVATIVES:
Nifty Futures has declined by 345 points in the last five trading ses-sions. In October series, Nifty Futures gained 234.85 points. During the last four days, the volume shows huge selling in the index. India VIX's volatility index has spurt to 18.20 once again after last Thursday, finally settling at 17.91. November series’ put-call ratio (PCR) is at 1.21 while the next week's PCR is at 0.52. The implied volatility (IV) has increased to 16.70. Because of this rise in IV, the option premiums are expensive for the next week .
For the next weekly expiry, the total call open interest is 7,22,504, and the total put open interest is at 3,77,656. The maximum call open interest is at 20,000 strikes with 67,137 OI, followed by 18,000 strikes with 60,704 OI. And the 18,300 strikes also have an open interest of 55,252. On the put side, the maximum open interest is at 18,000 strikes with 33,295 OI, followed by 17,800 strikes with 25,220 OI. At-the-money strike of 17,900 has an open interest of 22,124. A huge call selling was witnessed across the strikes and a long build-up was seen on the put side. The 17,900, 17,950, and 18,050 strikes have seen around 3,300 per cent increase in the open interest. On the put side, only 17,550 strikes open interest increased by 300 per cent. Max Pain for the next week is at 18,000 level while VWAP is at 18,013.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
HERITAGE FOODS LIMITED ...........BUY .......... CMP Rs 497
BSE Code :519552
Target 1: Rs 550
Target 2 : Rs 570
Stoploss : Rs 460 (CLS)
Current Observation:
•Heritage Foods Limited was founded by Nara Chandrababu Naidu, former Chief Minister of Andhra Pradesh in the year 1992. The company is operating two business divisions namely, dairy and renewable energy. The company’s milk and its products have a market presence in Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, Maharashtra, Odisha, Delhi NCR, Haryana, Rajasthan, Uttarakhand & Uttar Pradesh. The product portfolio includes curd, ice cream, frozen dessert, paneer, buttermilk, flavoured milk, lassi, A2 milk, and UHT milk. It has strong relationships with 30 lakh dairy farmers for milk. It has 18 state-of-the-art milk processing facilities with a processing capacity of 2.7 million litres per day.
• Technically, the stock has formed a 13-week cup pattern and is trading near the prior pivot level. The volume recorded has been above average for the last two weeks. Its relative price strength is fair at 61. Currently, the stock is trading above all the key moving averages. It is 5.46 per cent above the 20-DMA and 7.89 per cent above the 50-DMA. It is also trading above the anchored VWAP. The weekly Elder impulse system shows that the stock is in a strong bullish zone. The weekly MACD is about to give a buy signal. The ADX (35.60) shows strong trend strength. The weekly RSI is in a strong bullish zone.
•In short, the stock is ready to break out the bullish pattern. The short-term target is placed at Rs 550 while the medium-term target is at Rs 570. Maintain a stop-loss at Rs 460.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of TCI Express Ltd at Rs 1,641.80 in issue no. 01 (dated October 25, 2021). Post our recommendation, the stock moved higher in line with our expectations and went on to touch the level of around Rs 1,959. We had given a ‘book profit’ message at the level of Rs 1,810 via our SMS service on October 26, 2021. Thus, investors, who had taken positions according to this strategy, would have made a decent profit.