Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
It has been a volatile week for Nifty as it made huge swings in both directions. On Monday, Nifty had made a swing low of 16,410, which was about 838 points or a 4.8 per cent fall since the last expiry close. However, it made a strong recovery after that as it surged over the psy- chological level of 17,000 to close the day at 17,072. India VIX, which had soared over 23 per cent during the dip, cooled off with the recovery and currently, lies at 15.83.
On the day of expiry, Nifty gained about 117 points or 0.69 per cent. The media & metal indices showed a dismal performance while the realty, FMCG, IT, auto, and banking indi- ces supported the market. Power Grid Corp became the major contributor to index gains.
Nifty recovered about 662 points or 4 per cent from the week’s low. This low is the key support level for Nifty for the upcoming days. On the day of expiry, it formed a Doji candle on the third day of the rally. Moreover, Nifty receded from 20-DMA, which is also its day’s high. After today’s Doji candle, Friday’s closing would be an important one altogether, a strong closing after Doji candle will be a bullish indica- tion. Also, the closing above 20-DMA will indicate short-term bull- ishness to follow. Thus, a daily close above 17,148 is positive and will further test the level of 17,379 and 17,489. In case Nifty closes below 16,985, we can witness a return of fear on D-Street and in that case, Nifty can further fall towards the levels of 16,891 and 16,782. Hence, it is wise to play with light position sizing and wait for more clarity.
NIFTY DERIVATIVES:
Nifty Futures has declined 258 points or 1.48 per cent since the last weekly expiry or in the last five sessions. On a positive day, the open interest increased by 2.41 per cent. For the December expiry, the PCR is at 0.97, which indicates indecisiveness in the market. Currently, the IV percentile at at-the-money strike prices is at 53.57. On a weekly expiry day, India VIX cooled off by 4.52 per cent to settle at 15.83.
For the December expiry, the total call open interest is at 11,22,298 while the total put open interest is at 10,93,546. On the call side, the 18000 strike has the maximum open interest of 1,19,730, followed by 18,500 strike which has 92,984 contracts outstanding. On the Put side, the 17,000 strike has the highest open interest of 1,14,551, Next in line is 16,500 strike which has 93,780 open contracts. Moreover, maximum addition of open interest on Thursday is seen at 17,000 strikes of both call and put sides, thus indicating the creation of strad- dles at this strike. Also, with the PCR of 0.97, we can expect Nifty to consolidate at around 17,000 level. The at-the-money straddle of 17,100 costs Rs. 285, and with indecisiveness in the market, we can expect a weekly range of 16,800-17,400. For December expiry, Max Pain is at 17,100, and the VWAP is at 17,083.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
TUBE INVESTMENTS OF INDIA LTD ............ BUY ....... CMP Rs 1,705.00
BSE Code :540762
Target 1 : Rs 1,850
Target 2 : Rs1,900
Stoploss : Rs 1,580 (CLS)
Current Observation:
•Chennai-based Tube Investments of India Ltd is a Murugappa Group company that specialises in engineering, bicycles, metal-formed products, and chains.
• Technically, after registering an all-time high level of Rs 1,798, the stock has witnessed a counter-trend move, which is halted near the 61.8 per cent Fibonacci retracement level of its prior upward move and coincides with the 20-week EMA level.
• On Thursday, the stock has given a breakout of the falling channel on the daily chart along with a robust volume. With this channel breakout, the ADX, which shows the strength of the trend, turned upside and moved above the -DI. The +DI is above ADX and -DI. Its Mansfield relative strength (2.27) is above the zero line thereby, indicating the outperformance compared to the broader index i.e. Nifty 500.
• Interestingly, the daily RSI has taken support near the zone of 40 and surged above the 60 mark on Thursday. The weekly RSI is also in bullish territory and it is about to give a positive crossover. Recently, the MACD line has crossed the signal line and the histogram became green. Moreover, Martin Pring’s long-term KST setup has also given a buy signal.
• Technically, all the factors are currently aligned in support of the bulls. Hence, we would advise the traders to be with a bullish bias. The stock is likely to continue its upward momentum and test the level of Rs 1,850, followed by Rs 1,900 in the short term. The stop-loss can be maintained at Rs 1,580 on a closing basis.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of LG Balakrishnan & Bros Ltd at Rs 618 in issue no. 9 (dated December 20, 2021). Post our recommendation, the stock did not sustain at higher levels as selling pressure emerged in the market and the stock slipped below the stop-loss level. We rec- ommend our readers to exit with a loss. We exited the stock at Rs 567 on December 20, 2021.