Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY :

The past five days have been immensely volatile for the equity markets, not just locally, but globally as well. The Indian benchmark Nifty 50 oscillated over 600-odd points back & forth while it stayed in a defined range between key resistance and support levels. With the session on Thursday staying highly influenced by the weekly options expiry, the markets had a listless and range-bound day. The headline index ended with a nominal loss of 17.60 points (-0.10 per cent) while it formed a modestly lower top and lower bottom on the charts.

The volatility was infused with a sudden surge of geopolitical tensions between Russia and Ukraine as the former was found on the verge of attacking the latter, which spooked the markets in the worst possible manner. These tensions eased overnight, which caused the markets to lead a massive short-covering, fuelling the rally. Despite this, Nifty continued to relatively underperform its global peers. The volatility surged during this period with India VIX soaring over 16 per cent over the past five days.

While the index has validated the pattern support in the form of the falling trendline as evident from the chart along with the 200- DMA that presently stands at 16,837, it had halted just below the 50-DMA, which is currently at 17,465. Above this is the 100-DMA, which is at 17,623; this makes the zone of 17,500-17,650 a major resistance zone for Nifty in the near term.

For any sustainable extension of the current pullback to occur, Nifty will have to move past this zone convincingly.

Not only over the next few days, but for the immediate near term, the zone of 17,500-17,650 remains a stiff resistance area for the mar- kets. Along with the weekly index options expiry, we will also have the current month derivatives expiry, which will keep the trading sessions influenced by rollover-centric activities.

While the zone of 17,500-17,650 can be taken as potential resistance points going ahead from here, the supports can fairly be expected to come in at 17,180 and 17,000 levels. The RSI stays neu- tral and does not show any divergence against the price; the MACD stays bearish and is below the signal line.

All in all, there are all possibilities that the equity markets remain in a defined but broad trading range. Volatile oscillations may be there but the markets may not exhibit any directional bias unless Nifty moves past the 17,500-17,650 zone convincingly. The metals, PSU banks, IT, pharma, and consumption look better placed on the relative rotation graph (RRG) when benchmarked against the broader Nifty 500 index. These groups are likely to exhibit resilience in the event of the markets consolidating without any established direction- al bias. Though the domestic monetary policy and the impending interest rate hikes by Federal Reserve remain largely discounted at the current levels, a vigil eye on the tensions between Russia and Ukraine still holds the potential of disrupting the consolidation of the markets and spooking them once again. Apart from this external factor, Nifty is likely to continue to consolidate within the mentioned range. In any case, a vigilant eye on the protection of profits is advised. 

NIFTY DERIVATIVES:
Nifty February Futures too ended with a modest loss while widening its discount a bit. However, there was a little change on the options data front, which would keep the trading range for the coming days largely unchanged.

The levels of 17,400 and 17,500 saw a significant amount of call writing taking place; however, the level of 17,500 continues to see the maximum accumulation of the Call OI. This makes the level of 17,500, a major resistance for Nifty by the time it approaches the monthly expiry. Also, this keeps the upside capped for the index at this point. On the lower side, the highest Put OI is seen at 17,000, making the range of 17,000-17,500 a likely trading range over the coming week.

TECHNICAL RECOMMENDATION

STOCK STRATEGY

INOX LEISURE LTD.......... BUY ........CMP ₹ 417.20

BSE Code : 532706
Target 1 : ₹445
Target 2 : ₹455
Stoploss : ₹ 390 (CLS)

✓Current Observation: INOX Leisure Limited is a mid- cap company, engaged in the business of operating large multiplexes and movie screens in over 50 cities, making it a pan-India multiplex chain. It has a strong presence in its industry, offering a great cinematic experience.
✓ The stock, which surged over 6 per cent in the past four trading sessions, has gained momentum lately and is displaying a strong bullish momentum.
✓ It has witnessed a breakout of the neckline of the double bottom pattern along with above-average volume. The stock has recorded rising and above-average volume, greater than the 30-day as well as 50-day average volume.
✓ The stock is trading above its 20 & 50-DMA and both the moving averages are in the desired sequence.
✓ The stock meets Guppy’s multiple moving averages (GMMA) criteria, introduced by Daryl Guppy.
✓ The 14-period daily RSI has witnessed a crossover as it moved above its nine-period average. Moreover, it is on a rising trajectory.
✓ Considering the above factors, we believe that the stock has the potential to head higher and scale to the levels of Rs 445, followed by Rs 455. However, in case, market sentiment turn sour, keep a stop-loss at Rs 390.

REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Seamec Ltd at Rs 1,306 in issue no. 17 (dated February 14, 2022). This week, the bad global sentiments spoiled the market sentiment and as a result, the stock’s performance got affected. It fell sharply by 5.95 per cent on Monday and hit our defined stop-loss at Rs 1,220. Thus, we booked LOSS.