Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
The sharpest decline in the global markets dented the domestic market's sentiments further. In the last four trading sessions, Nifty gained just 23.5 points amid high volatility. After form- ing three parallel bottoms last week, it bounced sharply on Tuesday. Nifty has moved in a range of 660 points in the last six trading sessions. All the gains made on May 17 have eroded in the same faster manner. It tested the last week's low but is yet to form a major swing low. As the index has formed an inverted hammer on the weekly techni- cal chart, the market direction is clearly on the downside. The sharp surging moves in bear market conditions are common, and every such bounce will give fresh selling opportunities.
The southern Doji on May 16 got a bullish confirmation with a big bang move. However, it failed to get the follow-through and all the positive bias was erased today. Nifty has witnessed one of the sharpest declines in the last six weeks as it slipped 13.1 per cent. The previous downswing was 14.6 per cent in seven weeks. These downswings were sharpest after March 2020 fall. As the market has already completed the Stage-1 correction by declining more than 13 per cent, expect the category-2 correction of 25 per cent from its lifetime high. The targets for the future down- move are near 14,000 levels. It may take another five to six months to reach this target.
No positive divergences are visible on any timeframe. After flat- tening on Wednesday, the RSI has declined sharply near the zone of 30. The bounce and pullbacks are common and technical in nature. Do not get trapped in those rushing moves. Stay in sideways for investment, and wait for good trades on the short side.
NIFTY DERIVATIVES:
Nifty Futures declined by just 26.75 points since the last weekly expiry. Comparatively, the volume was lower than the previous week. However, they recorded above-average levels. For the last two days, the decline is on higher volume, indicating serious selling pressure in the market.
On Monday, Nifty had formed an inside bar or a Harami candle and rallied sharply the next day by 412 points. The index is yet to form a lower low as we are just 108 points away from the previous swing low. The global market sell-off dented the sentiment in the domestic market. The open interest is up by 14.5 per cent on a 2.65 per cent decline day, indicating that shorts were built-up in the market. The volatility index is up by 10.15 per cent today, which is almost flat compared to the last week. As we are entering into the last week of the monthly expiry, the put-call ratio (PCR) is at 0.71, which indicates bearishness. At the money, implied volatility (IV) of 24.3 is higher than the last week. It is also the highest in recent times. Due to this, the option premiums are higher.
At the money, the straddle premium is at Rs 415, which is on the higher side. The rollover data will give the directional bias from next week onwards. For the monthly expiry, the total call premium is 15,69,190 and the total put premium is 11,17,067. The 16,000 strike has the highest open interest of 98,915 and is followed by 16,500 strikes with 87,216 OI. On the put side, the 16,000 strike has the highest open interest of 86,304. Meanwhile, the at-the-money strike 15,800 has an OI of 79,763. There is a huge short built-up seen across the call strikes. On the put side, the 16,000 to 16,150 strikes witnessed short-covering while the remaining strikes saw long build-up. Max Pain is at 16,000 for the next weekly expiry. Meanwhile, VWAP is at 15,844.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
COROMANDEL INTERNATIONAL LTD ............ BUY ........ CMP ₹907.75
BSE Code : 506395
Target 1 : ₹1,013
Target 2 : ₹ 1,045
Stoploss : ₹ 880 (CLS)
Current Observation:
✓Murugappa Group Company is India's pioneer and leading agri-solutions provider, offering diverse products & services across the farming value chain. The company established India's first fertiliser plant at Ranipet (Tamil Nadu) in 1906. For the last hundred years, the company is offering customised farm solutions and advisory services. Its 'farmer first' approach, quality focus, and consumer connect initiatives have helped gain farmers' trust and established the 'Gromor' brand among the most trusted in the country.
✓ Technically, the stock has formed a Stage-1, 46-week cup pattern with a depth of over 25 per cent. The stock’s fair relative price strength has outperformed the broader market. It is trading above all the key moving averages. It is trading 8.27 per cent above the 50-DMA and 13.67 per cent above the 200-DMA. The Elder impulse system has formed a series of bullish bars and is trading just 2 per cent to the prior pivot level. For the last four weeks, the volumes recorded have been above average, which indicates demand for the stock. The weekly MACD and RSI are in a strong bullish zone. The stock is also meeting a majority of CANSLIM characteristics. It has an EPS rank of 86, which is a good score, indicating consistency in earnings. The relative price strength (RS) rating is improving and is near its previous high. Buyer demand at A-, which is evident from the recent demand for the stock along with a group rank of 33, indicates that it belongs to a strong industry group of chemicals and a master score of B is close to being the best.
✓ Accumulate this stock in the range of Rs 910-Rs 930. Maintain a stop-loss at Rs 880. The short-term target is placed at Rs 1,013 while in the medium-term, it can test Rs 1,045.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Tata Consultancy Services (TCS) at Rs 3,411 in issue no. 30 (dated May 16, 2022). After our recommendation, the stock climbed and hit a swing high of Rs 3,495, which is about 2.46 per cent from our recommended price. However, bad global cues dent- ed the market sentiment and the stock witnessed a strong fall. It hit our pre-defined stop-loss on Thursday, and eventually, we booked a loss.