Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
Nifty showed an incredible performance this week as it gained about 692.15 points or 4.17 cent since the last weekly expiry. The benchmark index continued its recovery and gained in four out of five trading sessions. During the week, it remained volatile with an upward bias. On the day of expiry, Nifty opened with a huge gap- up, owing to buoyant sentiment globally, and extended its gains during the day. In the end, Nifty closed higher by 1.84 per cent. It formed a bullish candle with a gap-up opening, which is back-to-back for the second consecutive day. Technically, this indicates a sharp trending move in the index and this is certainly depicted by the weekly candle.
Interestingly, the index managed to close decisively above its overhead resistance of 16,990-17,040 (200-DMA and opening down- side gap of February 24). With such a strong up-move, India VIX crashed about 11.6 per cent since last Thursday’s close. On Thursday, the fear index fell below 23-mark as the fear continues to recede among the market participants.
On the expiry day most of the sectoral indices closed in green, with financials, realty, and auto being the prominent sectors support- ing the market. HDFC, JSW Steel, and Titan Company emerged as the top gainers among Nifty stocks on Thursday. With the resistance zone of 16,990-17,040 being decisively bro- ken, the benchmark index has shifted its range upwards. Now, Nifty is likely to face resistance at the level of 17,380, which is its 100-DMA level, followed by 17,639 (its prior swing high). On the downside, the zone of 16,990-17,040 is likely to act as a strong support zone. In case this support zone is breached, the index can see a fall towards the crucial support level of 16,800. However, considering today’s gap-up, the chances of the gap getting filled cannot be ruled out. Thus, the index is expected to be trading in a wide range next week.
NIFTY DERIVATIVES:
Nifty Futures recovered from lower levels and soared about 713.15 points or 4.29 per cent since last Thursday. On the day of the weekly expiry, Nifty Futures closed at 17,325.05, up by 1.86 per cent. For the next weekly expiry, PCR stands at 1.11, while the monthly expiry stands at 1.49. Moreover, on the day of the weekly expiry, India VIX crashed about 6.26 per cent, which justifies the bullish stance of the market participants.
For March 24 weekly expiry, the total call open interest stood at 4,82,782 while the open interest on puts is 5,40,312. The 18,000 call option is found to have a huge open interest of about 52,228. Interestingly, the highest addition of open interest on the call side also lies at this strike. Thus, 18,000 will act as a strong resistance. Next in line is the 17,500 call option, which has 38,789 contracts outstand-ing. On the put side, 17,000 has the highest open interest of 47,725. Moreover, the highest addition of open interest is seen on this strike. Interestingly, straddles have been created in huge quantity at 17,300 strikes. The total premium of the straddle is around Rs 400, which means that the market participants are expecting the index to swing in the range of 16,900 to 17,700 for the next few days.
However, the index has been subjected to huge gap-ups and gap- downs lately and this can disturb the market sentiment. Thus, a wide range of 16,800 and 17,800 can be observed with the help of options data. For March’s fourth weekly expiry, Max Pain is at 17,250 while VWAP lies at 17,299.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
COROMANDEL INTERNATIONAL LTD. .......... BUY ............ CMP ₹ 849.95
BSE Code ...... 506395
Target 1 : ₹ 900
Target 2 : ₹ 930
Stoploss : ₹ 804 (CLS)
Current Observation:
◼Coromandel International Ltd is a manufacturer of fertilisers, plant protection chemicals, and speciality nutrients. The company has also ventured into the retail business in the agriculture and lifestyle segments.
◼ The stock of Coromandel International Ltd advanced more than 12 per cent in the past three trading sessions and also, made the day's high of Rs 855.25 level on Thursday thereby, indicating relative outperformance by the stock.
◼ Technically, the stock has registered a breakout above the downward sloping trendline, which was formed on the weekly chart by connecting the all-time high of Rs 956, signalling the resumption of an up move. Interestingly, the breakout is supported by a sizeable bullish candle and strong volume. Volume for the week was above the 10-week average volume, highlighting larger participation in the direction of the trend.
◼All the major indicators, in all the timeframes, are confirming a bullish direction. The 14-period RSI has marked a fresh 14-period high and is above the 60-mark as well as pointing northwards, which thus, supports the positive bias. The daily MACD is seen sustaining above its signal line and hence, validates positive bias in the stock. Moreover, the stock is trading above its short- term and long-term moving averages.
◼Considering the above points, the stock is expected to test the level of Rs 900, followed by Rs 930. However, due to uncertainty in the market, it is advisable to maintain a stop-loss at Rs 804. high of Rs 855.25 level on Thursday thereby, indicating relative outperformance by the stock.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Minda Industries Ltd at Rs 993.25 in issue no. 21 (dated March 14, 2022). As per our expectations, the stock traded firmly above our suggested buying price and remained strong throughout the week. We had given a ‘Book Profit’ message at the level of Rs 1,037.40 via our SMS service on March 17, 2022. Thus, traders, who had taken positions according to this strategy, would have made a decent profit.