Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY :

Since last Thursday, Nifty remained weak for most of the time as it plunged about 164 points or 0.92 per cent. After testing the strong support of the 17,600 level, Nifty bounced back on Friday and closed above the 17,750 level. This was con- sidered a victory for the bulls as they successfully managed to stabilise Nifty after three days of continuous fall of about 2.84 per cent. However, it was a pseu- do-win as this week, Nifty fell in all the three trading sessions and plummeted below the level of 17,500. Moreover, the bench- mark index formed a strong bearish candle and closed nearly at the day’s low on the day of the expiry.

This truncated week was largely focused on the local and the US inflation data, which turned out to be eye-popping! The local CPI data rose to a 17-month high and has induced fears of RBI hiking interest rates to stabilise inflation. Moreover, the key factor driving Nifty’s downtrend was the fall of HDFC Group shares. The shares of HDFC as well as HDFC Bank slipped about 3.41 per cent & 3.43 per cent, respectively, since last Thursday and have contributed the most to Nifty’s downfall. However, on a WoW basis, India VIX has tumbled about 6.36 per cent despite the weakness, indicating that market participants were expecting such a correction in the index.

Heading onto the next week, the level of 17,600, which acted as support this week, will be the first line of resistance. It will be followed by the 17,842 level, which is this week’s high. The next resistance will be an all-important level of 18,000. On the downside, the level of 17,400 shall act as the first line of defence, followed by the 17,296 mark, which is the 100-DMA. The 200-DMA, which lies at 17,166, shall act as the ultimate support for Nifty, following which, it can witness a major fall. With corporate results kicking in, Nifty is likely to remain volatile. Meanwhile, the stock-specific action would be keenly watched.

NIFTY DERIVATIVES:
Nifty Futures lost about 211 points or 1.19 per cent since last Thursday. Interestingly, Nifty Futures was trading at a significant premium before this week, and thus, we saw a good correction in futures than its spot price thereby, reducing the difference between futures & spot index. 

For the third weekly expiry of April, the total call open inter- est stands at 7,95,645 while the open interest on puts is 4,27,752. Interestingly, the open interest observed in the strikes of 18,000, 17,700, and 17,600 is found to be nearly equal at 63,000. Thus, aggressive call writing has been done for the next weekly expiry. On the put side, the maximum open interest lies at 17,000, which has about 44,998 contracts outstanding. With this, the PCR is placed at 0.54, which indicates strong bearishness. However, such a low PCR can bring in a short-covering rally, which can propel the index higher.

Also, we observed that some straddle positions were created at 17,500-strike, which have a combined premium of about Rs 280.

Considering this week’s behaviour of the index, it can be said that it’s likely to trade with volatility with a negative bias in the coming days. The options data and technical analysis suggest a broader range of 17,000-18,000 for Nifty in the next week. 

TECHNICAL RECOMMENDATION 

STOCK STRATEGY 

SHIPPING CORPORATION OF INDIA LTD............ BUY ........ CMP ₹133.90

BSE Code : 523598
Target 1 : ₹145
Target 2 : ₹152
Stoploss : ₹ 121.50 (CLS)

Current Observation:
✓As the country’s premier shipping line, Shipping Corporation of India (SCI) owns & operates around one-third of the Indian tonnage, and has operating interests in practically all areas of the shipping business, servicing both national as well as international trades.
✓ In the first week of April, the stock of SCI had witnessed a breakout of a downward sloping trendline formed by joining subsequent swing highs from December 2021. Thereafter, the stock moved higher and on Wednesday, it jumped over 6 per cent along with robust volumes. With this, the stock is on the verge of surpassing its crucial resistance point of Rs 134-Rs 136.
✓ Interestingly, the stock has managed to retrace about 78 per cent of the downfall, which was witnessed from January 17, 2022, to February 24, 2022.
✓ The stock is trading above its important short-term and medium-term moving averages. Furthermore, a bullish crossover was witnessed in the stock as the short-term moving average i.e. 20-DMA has crossed over 50-DMA.
✓ Talking about the leading indicator RSI, the 14-period daily RSI has marked a fresh swing high and it is in super bullish territory. The daily MACD is seen sustaining above its nine-period average thereby, validating positive bias in the stock. The MACD histogram is suggesting a pick-up in the upside momentum.
✓ The +DMI is above –DMI and ADX. An uptick in ADX shows improvement in the trend’s strength. The Elder Impulse System and KST show a bullish signal.
✓ We expect the stock to touch the levels of Rs 145, followed by Rs 152 while the stop-loss for this trade should be placed at Rs 121.50 on a closing basis. 

REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Info Edge (India) Ltd at Rs 4,821.95 in issue no. 25 (dated April 11, 2022). Post our recommendation, it hit a high of Rs 4,917.55 but bad market sentiments put some pressure on the stock as it correct- ed slightly from its high. However, the stock is still trading above its key short-term moving averages and recorded low volume during the correction. Thus, it can be considered a nominal correction. Thus, we recommend HOLD.