Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY :

For the last three weeks, Nifty is trading in the range of 15,735- 16,404. It is forming a base in the zone after a decline of 9.4 per cent from its previous base top.

The index failed to cross the 23.6 per cent retracement level of the downswing even after three weeks. It formed higher bottoms but is still below the 20-DMA. The 20-DMA and the upper Bollinger Bands are in a downtrend while the lower band has flattened. This is because of the ongoing consolidation. As the expiry session was on, Nifty bounced over 160 points in just an hour’s time due to the short covering.

Currently, the 20-TEMA is working as support, and today also, it bounced from this level. Today's short-covering recovery has not succeeded in crossing the previous day's high. The sharp recovery needs follow-through for bullish confirmation. For reversal on the upside, it has to cross 20-DMA (16,321) first and then, close decisively above the 16,400. The MACD histogram shows a strong bullish momentum. As the consolidation is already of ten days, many frontline stocks such as HDFC twins are nearing the base breakouts. Let's watch for these frontline stocks' behaviour. If these are the breakout candidates, then avoid a short position in the index. However, at the same time, wait for a base breakout to go long. The index is expected to breakout on either side within 3-4 days.

NIFTY DERIVATIVES:
Nifty Futures gained over 399.60 points or 2.53 per cent since the last weekly expiry. The volume is lower than the previous week because of rollover and expiry. As Nifty closed at the day's high, the bullish sentiment may continue for the weekend. The rollovers were recorded at 76.67 per cent, which is on par with the three-month average but is below the six-month average.

Last month, the rollovers were recorded at 78.14 per cent. June series started with a put-call ratio (PCR) of 1.3. The implied volatility is at 20.5 of the money (ATM) of June contracts, and it has been almost at the lower level in the last three months. Because of the IV, the straddle premium is at Rs 379 for next week, which is lower than the previous week. The volatility index India VIX declined sharply today by 10.15 per cent and settled at 22.72. It touched the 25.99 level during the last week. For the next weekly expiry, the total call open interest is at 5,94,646 while the total put open interest is at 5,90,035.

For the next weekly expiry, the PCR is at 0.99. On the call side, the highest open interest is at deep-out-of-the-money strike 17,000 with 62,273 OI, followed by 16,500 strikes with 47,682 OI. At-the-money strike 16,200 has an open interest of 38,806. On the put side, the deep-out- of-the-money strike 15,000 has the highest open interest of 41,009, followed by the 16,000 strikes with 40,810 OI. On the call side, a long built-up was seen across the strikes while the short built-up was seen on the put side. The 15,900 strike calls saw the highest rise in the open interest with 471 per cent. On the put side also, the same strike saw a 487 per cent rise in the open interest. The current derivative data shows that Max Pain is at 16,150 while VWAP is at 16,023.

TECHNICAL RECOMMENDATION

STOCK STRATEGY 

HDFC BANK LTD ............ BUY ........ CMP ₹1367.70

BSE Code : 500180
Target 1 : ₹1,415
Target 2 : ₹ 1,440
Stoploss : ₹ 1320 (CLS)

Current Observation:
✓HDFC Bank is one of India's leading private banks and was among the first ones to receive approval from Reserve Bank of India (RBI) to set up a private sector bank in 1994. Currently, HDFC Bank has a network of 6,342 branches and 18,130 ATMs in 3,188 cities & towns.
✓ In retail banking, HDFC Bank offers a diverse range of financial products as well as banking services to customers through a growing branch, ATM network, and digital channels such as net banking, phone banking, and mobile banking. Its wholesale banking division offers a wide gamut of commercial and transactional banking services to businesses & organisations of all sizes. Its services include working capital finance, trade services, transactional services, and cash management. Under treasury operations, the bank helps businesses generate better returns on their funds and manage financial risk. It focusses on three main product areas-foreign exchange & derivatives, local currency money market & debt securities, and equities.
✓ Technically, the stock has formed a minor base around the level of Rs 1,300 and is moving in a downward channel. It is trading around the prior resistance, which was also a support level earlier. Today, the stock is trading decisively above the 20-DMA while Bollinger Bands flattened and contracted. It may lead to an impulsive move. The RSI came out of a squeeze and entered the bullish zone. The MACD line is above the signal line, and the histogram shows a pickup in the bullish momentum. The +DMI is about to move above the -DMI. The ADX shows that the bearish trend strength has declined. The Elder impulse system formed three consecutive bullish bars. The KST and the TSI indicators turned bullish. The stock is also trading above the TEMA. In short, the stock is in a reversal mode. Buy this stock above Rs 1,367.70 with a stop-loss of Rs 1,320. The target is placed at the level of Rs 1,415.

REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Coromandel International Ltd at Rs 907.75 in issue no. 31 (dated May 23, 2022). As per our expectations, the stock trad- ed firmly above our suggested buying price. It witnessed some resistance at higher levels but we exited on time. We had given a ‘Book Profit’ message at the level of Rs 968 via our SMS ser- vice on May 24, 2022. Thus, traders, who had taken positions according to this strategy, would have made a decent profit.