Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
As compared to Wednesday’s session, Nifty ended in negative with a net loss of 219.80 points (-1.24 per cent). Since the low point of 16,836 seen on January 25, Nifty had gained close to 958 points while it tested a high point of 17,794 on February 02. This rise took place after almost six sessions. With the negative closing on Thursday, Nifty has given back just above 20 per cent of its most immedi- ate gains.
The index failed to move above the short-term 20-DMA. While it closed in the negative today, it has also closed below the 100-DMA. The 20 and the 100-DMA are at 17,748 & 17,647 levels, respectively. In all likelihood, Nifty has created a wide trading range for itself; the upper boundary near the 20-DMA and the lower support likely at the 50-DMA, which is at 17,438. Any significant weakness will occur only if Nifty slips below the 50-DMA level and violates it on a closing basis.
In the coming days, it is unlikely that Nifty will move out on either side of the broad 17,748-17,438 range. The oscillators are neutral. The index has formed a higher bottom at 16,836 after the low of 16,400 formed in December. This higher low point is likely to remain defended over the coming days. The sectors like pharma, metals, auto, and the public sector enterprises (PSEs) are showing good relative strength against the broader Nifty 500 index.
The directional bias over the coming days is likely to be neutral. Apart from the range-bound oscillations within the mentioned range, no significant runaway move is expected in the markets. Wednesday’s session has led to the formation of a strong bearish candle; the occurrence of this candle has the potential to temporarily disrupt the present technical pullback. A highly stock-specific action is expected over the coming days.
NIFTY DERIVATIVES:
Nifty’s February Futures ended with a net loss of 278 points. The weekly expiry of the Options saw strong call writing at 17,600 and 17,700 levels, which prevented Nifty from defending higher levels. Looking at the Options data for February 10 expiry, the maxi- mum Call OI concentration is seen that of 32.77 million shares at 18,000. This is followed by the second-highest Call OI concentration of 29.98 million shares at 17,800 strikes. This implies that Nifty is unlikely to move beyond the 18,000 levels. Not only this, the zone of 17,800-18,000 will offer very stiff resistance for the markets going ahead from here.
Looking at the lower side, the Options data for February 10 expiry shows the maximum Put OI concentration at 17,000 levels with a net Put OI of 21.02 million shares. This is followed by the second-highest Put OI of 19.41 million shares at 17,500 strikes. This means that the level of 17,500 offers important support to Nifty. If Nifty stays above this, then, it may see some short-covering and a technical pullback. Also, in other words, any serious violation of 17,500 levels on a closing basis may drift the markets lower.
Over the coming days, Nifty’s behaviour against the price action of 17,500 will be crucial to decide the trend in the immediate short- term. Nifty PCR, across all expiries, stands at 0.85.
TECHNICAL RECOMMENDATION
TATA POWER CO.LTD ............ BUY ....... CMP Rs 252.85
BSE Code :500400
Target 1 : Rs268
Target 2 : Rs275
Stoploss : Rs 240 (CLS)
Current Observation:
•Tata Power Company Ltd is India’s largest private sector power utility with an installed generation capacity of over 2,785 MW. The company has emerged as a pioneer in the Indian power sector with a track record of performance, customer care, and sustained growth. Tata Power has a presence in all the segments of the power sector viz generation, transmission & distribution.
• Technically, the stock has given a downward sloping trendline breakout on the daily chart. This breakout was confirmed by the above-average volume, highlighting strong buying interest by the market participants.
• Moreover, the breakout was supported by the RSI, which has entered the bullish territory. Along with this, the MACD line is above the zero line and signal line, signalling a bullish view.
• The stock has closed above the 78.6 per cent Fibonacci retracement, which is a strong indication of the bullish nature of the stock.
• Besides, the stock is trading above all the key moving averages. These moving averages are upward sloping, which suggests the bullish nature of the stock.
• With a strong breakout, the stock is expected to test its all-time high levels of Rs 267.85, followed by Rs 275. In case of any weakness, maintain a stop-loss at Rs 240.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Pearl Global Industries Ltd at Rs 565.00 in issue no. 15 (dated January 31, 2022). Post our recommendation, the stock moved higher as per our expectations and hit an all-time high of Rs 575 amid volatility. A slight correction was reflected in the stock thereafter and it has been consolidating near our recommended level. The stock shows no major weakness as it continues to consolidate with a positive bias. Thus, we rec- ommend the readers to HOLD the stock with a stop-loss of Rs 510.