Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY :

Nifty continued its upward journey in the sec- ond week of January as it surged about 512 points since the last weekly expiry. In all the last five trad- ing sessions, Nifty ended on a higher note with an average gain of 102.4 points per day.

On the day of expiry, Nifty ended marginally higher to close at 18,257. With this, the distance between the all-time high and the index close has reduced to just 1.9 per cent. Overall, the week has been a bullish one for Nifty as it surged about 2.80 per cent since the last weekly expiry. With such strong performance, market participants are out of the fear zone, which is reflected in India VIX as it has fallen nearly 7 per cent since last Thursday.

In the last two weeks, the banking indices single-handedly carried Nifty above 17,700. This week, a number of sectoral indices joined hands to lift Nifty even higher. Nifty Auto, Nifty Realty, Nifty Metal, and Nifty PSU Bank inched higher by over 3 per cent each. As we see more sectors participating in the rally, Nifty is likely to remain strong. Moreover, Nifty Metal displayed a strong performance on Thursday and surged about 3.48 per cent thereby, outperforming other sectors. With more sectors supporting the benchmark index in rallying further, we might very well see Nifty testing its all-time high level of 18,600. On Thursday, Tata Steel and JSW Steel emerged as the top gainers among Nifty stocks.

As we anticipated last week, the index has the potential to take out 18,000, eventually, turned out to be true and as a matter of fact, it closed much higher than 18,000. Also, Nifty took out its prior swing high of 18,210, from where it witnessed a major downfall. Considering the bullish nature of the index at present, we see the next resistance level of 18,342, which was its prior swing high. The next resistances in line will be the psychological level of 18,500 along with 18,604, which is also its all-time high level. However, we might also see some pitfalls for the index due to the corporate results season and find out the support level to be 18,210, 18,000, and 17,947. As we discussed last week, a bullish bias can be maintained, and hence, one must not fall for intraday volatility.

NIFTY DERIVATIVES:
Nifty Futures continued last week’s upward journey and remained strong throughout the week. It has surged about 501 points or 2.81 per cent since the last weekly expiry. On the weekly expiry day, Nifty Futures closed at 18,289, up by 0.27 per cent. Heading on to the next weekly expiry of January 20, the PCR stands at 1.09, which hints towards slight bullishness for the coming week. Moreover, the PCR for the monthly expiry remained constant at 1.66, which shows that the market participants are reluctant to change their extremely bullish view for the month of January. On the day of expiry, India VIX fell about 2.74 per cent while it has crashed about 7 per cent since the last weekly expiry.

For the next weekly expiry of January 20, the total call open inter- est stands at 5,17,395 while the total open put contracts are 5,64,473. The 18,200 strike holds the maximum open interest of 50,084 on the call side, which is followed by 19,000 strikes that have 48,953 open contracts. On the put side, the 18,000 has the maximum open interest of 59,944. Next in line is the 17,000 put option, which has about 6,33,787 contracts outstanding. Moreover, it has been observed that straddles have been created at 18,200. The price of 18,200 straddles is around Rs 292, which demonstrates a range of 17,908 and 18,492.

However, as mentioned earlier, corporate results will bring in vol- atility and might change the outlook completely. For January month- ly expiry, the total call open interest stands at 4,14,234 while the put side holds the total open interest of 6,87,626. For January's third weekly expiry, Max Pain is at 18,200 while VWAP stands at 18,263.

TECHNICAL RECOMMENDATION

POLYCAB INDIA LTD​ ............ BUY ....... CMP Rs 2,685.95

BSE Code :542652
Target 1 :  Rs2,900
Target 2 : Rs3,000
Stoploss  : Rs 2,500 (CLS)

Current Observation:
• The company is engaged in the business of manufacturing and selling wires, cables & fast-moving electrical goods (FMEG) under the brand, ‘Polycab’. Apart from wires & cables, the company manufactures and sells FMEG products such as electric fans, LED lighting & luminaires, switches as well as switchgear, solar products, conduits & accessories.
• Technically, the stock has given multiple touchpoints horizontal trendline breakout on the daily chart. This breakout was confirmed by more than five times of 50-day average volume, indicating strong buying interest by the market participants.
• As the stock is trading at an all-time high level, it is also trading above its short and long-term moving averages. Daryl Guppy’s multiple moving averages is suggesting a bullish strength in the stock. Further, the stock is meeting Mark Minervini’s trend template rules. These two set-ups are giving a clear uptrend picture in the stock.
• The momentum indicators and oscillators are also suggesting a further bullish momentum. Interestingly, the daily RSI has also given a downward sloping trendline breakout and currently, it is in bullish territory. The daily MACD stays bullish as it is trading above its zero line and signal line. n Considering the robust technical structure of the stock, we believe that it is likely to touch the level of Rs 2,900, followed by Rs 3,000. Maintain a stop-loss at Rs 2,500. 

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Cybertech Systems & Software Ltd at Rs 223 in issue no. 12 (dated January 10, 2022). Post our recommendation, the stock moved higher in line with our expectations and went on to touch the level of around Rs 244.80. We had given a ‘Book Profit’ message at the level of Rs 241.75 via our SMS service on January 11, 2022. Thus, investors, who had taken positions according to this strategy, would have made a decent profi