Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY :

Nifty kicked off New Year on a cheerful note as it soared about 542 points in the first week of January. It rallied constantly from 17,203 to 17,944 in just four trading sessions with an average of 1.08 per cent per day. However, Federal Open Market Committee (FOMC) minutes derailed the good global sentiment and Nifty plunged about 1 per cent on the day of expiry. Overall, the week has been a bullish one for Nifty as it surged about 3.15 per cent since the last expiry. Despite a good week, India VIX has surged about 8.5 per cent since last Thursday.

The banking indices became the top performers of the week as they single-handedly supported Nifty to soar higher during the week. Nifty Bank too surged about 6.92 per cent during the week. Besides, on the day of the expiry, the banking indices have performed well as compared to the other sectoral indices. Therefore, Nifty Bank is likely to be the frontrunner in supporting Nifty in the times to come. In today’s downfall, JSW Steel and UltraTech Cement were the top draggers for Nifty while UPL, as well as IndusInd Bank, supported the market.

A major indication that the index has changed its bearish senti- ment is that the index is trading above all the short-term and long- term moving averages. After a successful week, more inclination can be given towards bullishness. For the next week, the weekly high of 17,944 will act as a major resistance, followed by the 18,000 psycho- logical resistance. However, with the ongoing bullishness, one must not be surprised if 18,000-level is taken out. On the flip side, 17,655 will act as a good support level as it is a recent low of the index. The 17,639 level happens to be the next support level for Nifty as it was at this level when Nifty started tumbling. The next support will be an important 17,500 psychological level. It can be said that one must focus on the resistances rather than supports, considering the overall market sentiment.

NIFTY DERIVATIVES:

Nifty Futures showed signs of recovery two weeks ago and con- firmed the bullish trend this week as it soared about 527.05 points or 3.05 per cent since the last weekly expiry. On the day of the weekly expiry, Nifty Futures closed at 17,795. For the next weekly expiry of January 13, the PCR stands at 1.02, which indicates indecisiveness for the coming week. However, the PCR for the monthly expiry is at 1.66, which indicates extreme bullishness for the period. On the day of expiry, India VIX has surged nearly 4.35 per cent to close at 17.98.

For the next expiry of January 13, the total call open interest stands at 5,64,797 while the total open put contracts are 5,77,691. On the call side, 18,000 strike holds the maximum open interest of 68,176, which is followed by 17,800 strikes having 50,001 open contracts. On the put side, 17,500 will act as the major support level as this strike holds the maximum open interest of 57,757. Next is 17,700 put options, which has 37,356 contracts outstanding.

As the market remained weak on Thursday, call options were written aggressively as 17,800 and 18,000 had the highest change in the open interest. Along with this, more addition is seen in 17,500 put options. An equal amount of open interest has been added at 17,700 strikes for both, call as well as the put side, which indicates that the market participants are creating straddles at this level. The price of the straddle is around Rs 320. Thus, a range of 18,020 and 17,380 can be expected. However, this is subject to change as the market has been quite volatile for a few days. For monthly January expiry, the total call open interest stands at 3,75,525 while the put side holds the total open interest of 6,24,069. For January's second weekly expiry, Max Pain is at 17,750 while VWAP stands at 17,776.

CYBERTECH SYSTEMS AND SOFTWARE LTD ​ ............ BUY ....... CMP Rs 223

BSE Code :532173
Target 1 :  Rs 245
Target 2 : Rs250
Stoploss  : Rs 205 (CLS)

 Current Observation:
 •Cybertech Systems & Software Ltd provides software consultancy and delivers business IT solutions to organisations. The company’s expertise lies in SAP, geographical information system (GIS), and cloud transformation.
 • Technically, the stock has given a downward sloping trendline breakout as of December 29, 2021, and thereafter, witnessed a 36 per cent upside in just three trading sessions.
 • After registering the high of Rs 242.90, the stock witnessed a minor throwback. During the throwback phase, the volume activity was relatively lower, which suggests that it is just a routine decline after a robust move. The throwback was halted near the 38.2 per cent Fibonacci retracement level of its prior upward move, which coincides with the 8-day EMA level.
 • The stock is trading above its short and long-term moving averages. The leading indicator i.e. the 14-period daily RSI is in a super bullish zone. The MACD is above the zero line and the signal line. And most importantly, the MACD histogram crossed the prior swing highs.
 •The trend strength indicator i.e. the average directional index (ADX) is at 35.66, which indicates strength. The +DI is much above the -DI. This structure is indicative of the bullish strength in the stock. Based on the above observations, we expect the stock to continue its upward movement and test the levels of Rs 245, followed by Rs 250 in the short term. Stop-loss can be maintained at Rs 205 on a closing basis. 

REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Tube Investments of India Ltd at Rs 1,705 in issue no. 10 (dated December 27, 2021). Post our recommendation, the stock moved higher in line with our expectations and went on to touch the level of around Rs 1,929.35. We had given a ‘Book Profit’ message at the level of Rs 1,823.50 via our SMS service on January 03, 2022. Thus, investors, who had taken positions according to this strategy, would have made a decent profit