Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
This week, Nifty moved higher amid volatility and gained about 242 points or 1.40 per cent since last weekly expiry. On Monday, the bench- mark index once again tested its 200-DMA level at 17000-mark and recovered sharply thereafter and went from strength to strength to surpass its 8-days long trading range of 17442-17000 on Wednesday. However, it was not met with enthusiasm on the day of expiry as Nifty fell about 33.50 points to close at 17,464.50 while on the daily chart, it formed a small-bodied bearish candle.
The monthly picture is much prettier as the index rose significantly by about 1216.80 points or 7.48 per cent since last monthly expiry. Interestingly, this week, the index moved above all the short term and long term daily moving averages after many weeks. The 100- DMA which proved to be strong hurdle for Nifty last week, was very well taken out this week. On the monthly technical chart, the index formed a strong bullish candle with longer shadow, indicating strong buying emerging from the lower levels. Along with the positive upmove of Nifty, India VIX crashed about 14.08 per cent and closed at 20.56 since last Thursday.
In March, India VIX cooled off significantly by about 28 per cent, indicating that the market fear has subsidised substantially on the D-Street. On the day of the expiry, the market was primarily supported by Nifty FMCG while Nifty Pharma, Nifty PSU Bank, and Nifty IT closed weak.
Interestingly, despite a strong upmove from the March lows of 15,671 to the high of 17,559, which translates to a nearly 12 per cent upmove, the leading indicator i.e. 14-period daily RSI has not managed to move the 60-mark. The +DMI is above the -DMI and ADX, but the +DMI has not managed to cross the high of March 17, 2022, which raises suspicion over the recent rally.
Heading into the new series, the 17500-level is likely to act as a tough resistance for the index. Next in line is 17639, which is its prior swing high, followed by the level of 17794, which has acted as a strong resistance for the index in the past. Any move above the 17800-mark shall be met with a strong uptrend. However, on the downside, 17318-level which is its 100-DMA level, will act as the first line of support. If breached, the index can test again its 200- DMA level of 17070, and 17000 thereafter. However, the index is unlikely to produce any bigger moves and it is likely to do a see-saw in a range as the street remains skeptical about Russia’s willingness to find a diplomatic solution to the crisis.
NIFTY DERIVATIVES:
Nifty Futures closed March series by gaining about 669.5 points or 3.98 per cent during the month. Since last Thursday, Nifty Futures gained about 1.28 per cent amid volatility. With April series coming up, the monthly PCR stands at 1.37, indicating bullishness. On the day of the weekly expiry, India VIX closed marginally lower at 20.56.
For the first weekly expiry of April, the total call open interest stands at 7,29,599 while the open interest on puts is 5,91,066. Thus, the PCR is placed at 0.81, indicating slight bearishness. Currently, the maximum open interest on the call side lies at 17,500 strikes, followed by 17,600 strikes. On the put side, the maximum open interest lies at 17,500, followed by 17,400. Moreover, straddles have been created in huge quantities at the strike of 17,500. The premium of the strike is about 350 points, which indicates a trading range of 17,150-17,850 for the next week.
Considering this week’s behaviour of the index, it is likely to trade in a range-bound manner while volatility is expected to persist. The options data and technical analysis suggest a broader range of 17,000- 17,850 for Nifty next week.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
NEOGEN CHEMICALS LTD. ............ BUY ........ CMP ₹ 1,745.75
BSE Code : 542665
Target 1 : ₹ 1,850
Target 2 : ₹ 1,930
Stoploss : ₹ 1,620 (CLS)
Current Observation:
✓Neogen Chemicals Ltd is a 30-year-old company, specialising in Bromine-based compounds, Grignard reagents, and inorganic lithium salts.
✓ The stock registered an all-time high of Rs 1,930 in the first week of January 2022. Thereafter, it corrected nearly 30 per cent from its all-time high. Interestingly, this correction halted near the 30-week moving average and historically, the 30-week moving average has acted as strong support for the stock. Furthermore, the stock formed an AB=CD harmonic pattern on the weekly chart, which resulted in the resumption of an uptrend in the stock.
✓ On Thursday, the stock has given a breakout of descending channel on the weekly chart, which is signalling the resumption of upmove. What is more striking is the fact that it has formed a sizeable bullish candle on the daily chart along with above-average volume! Volume for the day was the highest single volume since January 05, 2022, highlighting larger participation in the direction of the trend.
✓ As the stock has registered almost a fresh two-month high, it is trading above its 20, 50, 100, and 200-DMA. The leading indicator i.e. the 14-period daily RSI is above its prior swing high as well as the 60-mark. The daily MACD stays bullish as it is trading above its zero line and signal line.
✓ In a nutshell, the stock has registered a breakout of the descending channel along with robust volume, offering a fresh entry opportunity. The stock has the potential to test the levels of Rs 1,850, followed by Rs 1,930 in the medium term. Meanwhile, the stop-loss on the downside would be Rs 1,620.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of KEI Industries Ltd at Rs 1,199.90 in issue no. 23 (dated March 28, 2022). As per our expectations, the stock traded firmly above our suggested buying price. We had given a ‘Book Profit’ mes- sage at the level of Rs 1,248.20 via our SMS service on March 31, 2022. Thus, traders, who had taken positions according to this strategy, would have made a decent profit.