Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY :
Nifty moved downwards on high vol- atility in the last four trading sessions. It declined 573.45 points or 3.33 per cent and broke the countertrend con- solidation. With this, Nifty has tested almost 61.8 per cent retracement level (16,604) support. During this period, the declines were sharper.

With RBI's surprise interim mon- etary policy, the markets fell sharply across the sectors on Wednesday. The recovery effort from the lower levels of Monday did not sustain for long. The 50-DMA acted as resistance for two days. After a 2.3 per cent fall on Wednesday, Nifty is forming an inside bar and does not have any trend change implications. However, as it closed near its previous day's low, a breakdown below 16,604-23 will further strengthen the bears.

The pennant breakdown target is placed at 16,087-124 zone of support. This is almost the downward channel support. Currently, Nifty is holding eight distribution days and trading below the 50 and 200-DMAs, which is a long-term bearish indication. At the same time, the 50-DMA is below the 200-DMA while a 'death cross' is also a bearish sign. The distance between these two trend indicators is widening. Unless the index decisively closes above the 50-DMA (17,078), the trend will remain on the downside. The 200-DMA (17,242) will act as another resistance. As the index witnessed a strong downmove, a short-term bounce is a possibility. During this bounce, Nifty has to first cross the 50-DMA and then the strong resistance zones of 17,193 - 17242. The market breadth is extremely negative, and none of the sectors is in a position to lead or support the market. About 70 per cent of Nifty stocks are below the 200- DMA while 57 per cent of the stocks are below the 50-DMA. This negative bias is another indicator of the weaker market. It is better to protect the capital in the current market conditions. Staying side- lines is a better strategy than taking risks in a volatile market. One should wait for the market conditions to improve and avoid catching a falling knife.

NIFTY DERIVATIVES:
Nifty futures declined 579.35 points or 3.35 per cent since the last weekly expiry. It traded in a 756-point range in just four trading sessions. The volatility remained elevated due to the monetary policy and weakness in the global markets. The volatility index VIX touched 22.39 levels but cooled off on Thursday. For the next weekly expiry, the PCR is at 0.48, which shows an oversold market wherein, a bounce is possible. For the monthly contract, the implied volatility (IV) is very high at 19.3 while for the next weekly expiry, the IV is at 19.8.

For the next week's expiry, the total Call open interest (OI) is 9,22,358, and the Put open interest is 4,47,029. There was a huge call selling seen across 17,000-strike. The out-of-the-money (OTM) strike 17,000 has the highest open interest of 89,043, followed by the deep-out-of-the-money strike 17,500 with 61,225 OI. On the Put side also, the shorts were built up. The deep-out-of-the-money strikes like 15,100 have the highest open interest of 41,100 while 16,000 strike has an open interest of 40,363. The 15,500 strike also has an open interest of 35,286. Near at-the-money strike 16,500 have 33,007 OI. Interestingly, the 16,600 strike has 20,289 OI. This trend is an indication that traders are betting on the lottery. Based on the current derivative data, the next week's Max Pain is at 16,800 and the VWAP is at 16,774.

The derivative market may see high voltage volatility as the IV is at the highest level and PCR is at the lowest level. A bounce may lead to a serious short covering.

TECHNICAL RECOMMENDATION

STOCK STRATEGY 

TRANSPORT CORP. OF INDIA LTD ............ BUY ........ CMP ₹ 711.00

BSE Code :532349
Target 1 : ₹817
Target 2 : ₹ 856
Stoploss : ₹ 676 (CLS)

 Current Observation:
✓Transport Corporation of India (TCI) is the country's leading integrated multimodal logistics service provider. With expertise spanning over six decades and infrastructure comprising an extensive network of over 1,400 company-owned offices, 12 million square feet of warehousing space, and a strong team of more than 6,000 trained employees, TCI Group has expanded boundaries to offer seamless multimodal transportation solutions in both Indian as well as the global markets.
✓The company’s operations are technology-driven as it has a central monitoring system, logistics control tower, and fleet management system. Apart from that, it is engaged in robotics process automation, data analytics, artificial intelligence as well as machine learning. It deployed tools like global positioning system (GPS), geographic information system (GIS), radio frequency identification (RFID), barcode scanners, etc. Diversified service offerings and a large customer base helped to grow its momentum amid mixed sectorial trends. The company’s strategy of integrated logistics play has showcased effectiveness and strength.
✓ Technically, the stock is in a counter-trend, forming a bull flag and trading at the resistance. It is above the key moving averages, 15 per cent above the 50-DMA, and 21 per cent above the 200-DMA. It is currently trading near to 61.8 per cent retracement level of the prior downswing. The daily and weekly MACD have given a fresh buy signal. The RSI is in a strong bullish zone. The volume is higher in the present week compared to the previous week. The Elder impulse system has formed four consecutive bullish bars. The stock is also above the 20-period TEMA. The weekly ADX (27.96) shows solid trend strength. In short, the stock is about to break out of the counter-trend consolidation. A move above Rs 762 is positive, and it can test Rs 817 in the short-term while Rs 856 in the medium-term. Maintain a stop-loss at Rs 676.

REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Bharat Electronics Ltd at Rs 246.75 in issue no. 28 (dated May 02, 2022). After our recommendation, the stock tested the level of Rs 250 but witnessed strong resistance. Moreover, bad market sentiment caused by RBI’s unexpected interest rate hike dented the stock’s performance and it fell nearly 3 per cent on Wednesday. It hit our stop-loss and thus, we booked a loss.