Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
Since last Thursday, Nifty underwent a rollercoaster ride as it soared as high as 18,100 level, only to fall back to 17,650 level. During the week, it gained about 175 points amid volatility.
On Friday & Monday, the benchmark index had gained about 650 points and formed an upward gap of about a per cent. The merg- er news of HDFC was the driving factor behind this crazy upmove. However, this move was followed by a three-day losing streak of 475 points. During this period, the index filled the gap decisively and formed a reasonable bearish candle with a minor upper shadow on Thursday. Interestingly, the recovery, which was seen in the mid-part of Thursday, met with selling pressure right near the lowest point of Wednesday’s trading session, which indicates rallies are being used to offload the long positions.
On the day of expiry, Nifty fell about 0.94 per cent to close at 17,639.55. Sectors like pharma & realty traded higher while IT and metals underperformed. However, on a WoW basis, India VIX declined by about 7.58 per cent but it is still trading above its 200- DMA.
Heading onto the next week, the level of 17,794 shall act as a tough resistance, followed by the 18,000 level, which is the breakout level of the falling trendline. If that is breached, this week’s high of 18,114 shall become the next major resistance to watch out for. On the downside, the level of 17,500 shall act as the initial support, followed by the 17,300 level, where the 50-DMA and 20-DMA lie.
Currently, the 200-DMA lies at 17,120 and this will act as the ultimate support for the index. The RBI policy, scheduled on Friday, and the corporate results, which will kick in from the next week, are likely to dictate the market trend in the near term.
NIFTY DERIVATIVES:
Nifty Futures swung in both directions amid volatility and closed higher by 198 points since last Thursday.
For the second weekly expiry of April, the total call open inter- est stands at 9,02,091 while the open interest on puts is 4,67,607. Currently, the maximum open interest on the call side stands at 18,500 strikes, followed by 18,000 strikes. On the put side, the maxi- mum open interest lies at 17,800, followed by 17,000. As we observe, the call options are written aggressively on the strikes of 17,800, 17,900, and 18,000. With this, the PCR is placed at 0.52, which indicates strong bearishness. However, such a low PCR can bring in a short-covering rally, which can propel the index higher.
Considering this week’s behaviour of the index, it is likely to trade with volatility in the coming days. The options data and technical analysis suggest a broader range of 17,000-18,100 for Nifty next week.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
INFO EDGE (INDIA) LTD ............ BUY ........ CMP ₹ 4,817.60
BSE Code : 532777
Target 1 : ₹5,050
Target 2 : ₹ 5,300
Stoploss : ₹ 4,590 (CLS)
Current Observation:
✓Info Edge (India) Limited is a holding company involved in online classifieds business. Its segments include Recruitment Solutions, 99acres, Online Restaurant Discovery, Jeevansathi, and Shiksha services.
✓ The stock was resilient on Thursday as, despite a severe sell-off in the markets, it gained nearly 1.90 per cent. On the daily chart, the stock had formed an inside bar on Wednesday while on Thursday, it managed to close above the inside bar high. On the weekly chart, the stock formed a hammer-like pattern as of the week ended April 1 while in the current week, the stock has formed a bullish candle along with an almost identical open and low.
✓ Interestingly, on the daily chart, the stock had witnessed a breakout of the horizontal trendline on an intraday basis. Furthermore, the volume for the day was greater than its 10 and 30-day average volume.
✓ The stock is trading above its 20 & 50-DMA and interestingly, the shorter-term moving average i.e. 20-DMA is about to cross over the 50-DMA. The daily MACD has stayed bullish as it is trading above its zero line and signal line. The MACD histogram is suggesting a pick-up in the upside momentum.
✓ The stock’s relative strength index (RSI) has marked a fresh 14-period high, which is bullish, and also, managed to close above its prior swing high. The +DMI is above –DMI and ADX. An uptick in ADX shows improvement in the trend strength. The Elder Impulse System and KST show a bullish signal.
✓ As such, we expect the stock to test the levels of Rs 5,050, followed by Rs 5,300 in the medium term. While on the downside, maintain Rs 4,590 as stop-loss
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Neogen Chemicals Ltd at Rs 1,745.75 in issue no. 24 (dated April 04, 2022). Post our recommendation, the stock hit a high of Rs 1,795. However, it faced resistance at the higher level and corrected slight- ly but it is still trading above the key moving averages. Moreover, the price structure and technical indicators do not indicate bearish- ness. It is trading near its 50-DMA, and we expect a bounce back from here on. Thus, we recommend HOLD.