Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
The benchmark indices declined for the fifth straight day. In the last five trading sessions, Nifty has plunged 874.65 points or 5.24 per cent. The index is very near to its swing low of March 8. Currently, Nifty is trading 8.25 per cent below the 200-DMA and 6.95 per cent below the 50-DMA. Interestingly, it is 6.34 per cent below the 20-DMA but earlier i.e. on March 8, it was 6.49 per cent. Usually, Nifty does not move more than 6-6.5 per cent below the 20-DMA, except in March 2020. Generally, whenever the price moves far away from average, it will go back to the moving average level. Nifty, which now declined much below the Bollinger lower band, shows the oversold condition in the market. The RSI also declined below the zone of 30 and entered the oversold zone.
Currently, Nifty is forming a broadening triangle and the support is placed at the 15,000-100 zone, which leads to another low. In fact, Nifty closed below the 23.6 per cent retracement level of the March 2020-October 2021 uptrend. Only if Nifty closes above 15,986, it will negate the bearish implications. Earlier, in March 2022, it had declined below this level but soon, recovered and closed above it.
Let us wait for a close below the 15,671 level of support. If Nifty closes below this level, it will test the 15,199 level with minor bounces.
All the sectoral indices were down while the mid-cap and the small-cap stocks were bleeding. The smallcap-100 index slipped 28.4 per cent while the Midcap index tumbled 19.19 per cent from their recent tops. These broader indices underperformed the benchmark indices. Currently, the market is not conducive to building fresh purchases
NIFTY DERIVATIVES:
Nifty futures declined 876.30 points or 5.24 per cent since the last weekly expiry. The volume is recording above-average levels, indicating serious selling pressure in the market. Today's volume is the highest in the last six days. Nifty opened with a negative gap on all five days. It is just a few points away from the swing low of March 8. Last week's Monetary Policy repercussions had a serious impact on the market. The open interest is up by 15.4 per cent on an over 2 per cent decline day, indicating that the shorts were built up in the market. The volatility index is up by 19.58 per cent from 20.29 to 24.26 since the last weekly expiry. It reached its highest level after the third week of March. The put-call ratio (PCR) is at 1.05, which shows that the downside is limited and the market is in a neutral zone. At the money, implied volatility (IV) 23.7 is at its highest in recent times, and this is the reason why option premiums are higher. For the next weekly expiry, the total call premium is at 10,13,015 while the total put premium is at 3,72,671. The 16,000 strike has the highest open interest of 75,260, followed by 16,200 strikes with 62,699 OI. The 16,500, 16,300, and 15,900 strikes also have the highest call open interest above the 41,000. On the put side, the highest open interest is at 16,000 strikes with 47,126 OI. The 15,500 strike has an open interest of 32,206. There is a huge call short build-up across strikes and long built-up on the put side. The current derivative data suggests that the Max Pain is at 15,900 for the next weekly expiry. Meanwhile, the VWAP is at 15,853.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
TATA CONSULTANCY SERVICES LTD ............ BUY ........ CMP ₹ 3,411.00
BSE Code :532540
Target 1 : ₹3,550
Target 2 : ₹ 3,600
Stoploss : ₹ 3,300 (CLS)
Current Observation:
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✓ Technically, the stock has made parallel lows at the zone of Rs 3,350-Rs 3,390. This zone had acted as resistance earlier and hence, the principle of polarity comes into the picture as the former resistance turns into support. It is trading in the range for the past three days and has developed a positive divergence in RSI on the daily chart. The Elder impulse system shows that the stock has entered the neutral zone after a strong bearish move. Currently, it is trading above the TEMA. The rising ADX (28.48) shows a pickup in the bullish strength of the stock. The histogram shows the flattened momentum. The stock is making an effort to consolidate at the base.
✓ A close above the prior day's high will give the first signal for a bullish bias. The move above Rs 3,440-50 is positive. It may face a resistance at Rs 3,550. Above this, it can test Rs 3,600. Maintain a stop-loss at Rs 3,300
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Transport Corporation of India Ltd at Rs 711 in issue no. 29 (dated May 09, 2022). After our recommendation, the stock climbed and hit a swing high of Rs 764.45. However, bad market sentiment weighed heavily on the stock and it tumbled sharply thereafter from higher levels. It hit our pre-defined stop-loss on Tuesday and we booked a loss