Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
In the past four days, Nifty traded with huge volatility. Since the last weekly expiry, the index closed lower by about 83 points or 0.47 per cent. On Monday, it witnessed a huge gap-down opening, owing to bad global cues. During the week, it hit a low of 16,824.70 but saw a sharp recovery thereafter as it gained over 568 points in the next two days. It remained positive on the day of the weekly expiry and surged about 1.49 per cent to close at 17,392.60.
Interestingly, the index is forming a bullish pinbar candle on the weekly chart with a day remaining. It took the support of its 50-week MA and bounced back sharply. On a WoW basis, India VIX remained flat despite the volatility. This week, the market factored in the results of HDFC Bank & Infosys, and these stocks were subse- quently hammered. The FMCG giant Nestle India has also posted a relatively weak result with a dip in profits. Thus, the corporate results are weighing strong on the index. However, considering the broader picture, the index is trading in an unclear direction.
Heading onto the next week, the 200-DMA level of 17,185 will act as the first support, followed by the 17,000-psychological level. This week’s panic low of 16,824 shall act as the ultimate support, below which, the index can witness a severe downfall. However, on the upside, the 20-DMA level of 17,466 shall act as an immediate resistance to overcome. If the index sustains above this level, it can test the level of 17,663 and 17,842, thereafter. The corporate results season is on the go, and we are likely to witness the stock-specific action in the coming days while Nifty is expected to remain volatile.
NIFTY DERIVATIVES:
Nifty Futures lost about 105 points or 0.60 per cent during the week. For April's monthly expiry, the total call open interest stands at 10,94,284 while the open interest on puts is 10,22,686. With this, the PCR stands at 0.93, which indicates slight bearishness among the market players. The 18,000-strike holds the maximum open interest of about 97,650 on the call side. In the case of puts, the 17,000-strike has the maximum of contracts outstanding i.e. 86,664. On the day of the expiry, it is observed that the put options at the strike of 17,300 and below have been written aggressively.
Also, we observe that some straddle positions have been created at 17,300-strike and have a combined premium of about Rs 310.
Considering this week’s behaviour of the index, it can be said that it is likely to trade with volatility in the coming days. The options data and technical analysis suggest a broader range of 17,000-18,000 for Nifty next week.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
GUJARAT ALKALIES & CHEMICALS LTD ............ BUY ........ CMP ₹ 976.40
BSE Code :530001
Target 1 : ₹1050
Target 2 : ₹ 1100
Stoploss : ₹ 920 (CLS)
Current Observation:
✓Gujarat Alkalies & Chemicals Limited (GACL) is one of India's largest caustic soda producers in India with a production capacity of 1,087 TPD. It has two major manufacturing facilities set in Vadodara and Dahej (both in Gujarat). The major products are the caustic soda group, caustic potash group, hydrogen peroxide, chloromethanes, poly aluminium chloride, stable bleaching powder, and sodium chlorate. The company has its presence across the globe and its plants are working with almost 100 per cent capacity utilisation.
✓Technically, the stock has broken out of a bullish flag pattern with a high volume. The prior pivot acted as a support during the flag. The stock took support exactly at the 23.6 per cent retracement level of the previous uptrend. And the 20-DMA also acted as a support. Currently, it is just at an arm's length from its prior pivot level. It closed above the five days' high. The MACD is about to give a bullish signal while the RSI is about to break the bullish flag pattern. The directional indicators show strong trend strength. It is above the anchored VWAP resistance. The Elder impulse system has formed a strong bullish bar. The stock has also closed above the 20-period triple exponential moving average (TEMA), which is a bullish sign. In short, the stock has broken out of a bullish pattern with a high volume. Buy the stock above Rs 976.40 with a stop-loss of Rs 920. The short-term target is Rs 1,050.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Shipping Corporation of India Ltd at Rs 133.90 in issue no. 26 (dated April 14, 2022). Post our recommendation, it hit a high of Rs 137.70 but witnessed resistance at a higher level. It saw a nominal correction due to bad market sentiment and is trading near our recommended price. However, the price action does not indicate weakness, and the stock trades above all its key moving averages. Thus, we recommend HOLD.