Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
Nifty is consolidating for the last three days after moving about 4 per cent in just three days. In the last five trading sessions, it climbed 458 points or 2.83 per cent. This big move took place in just two days. After forming two indecisive and bearish candles, it formed a strong bullish candle today. However, the concern is that the benchmark index has formed an inside bar.
In the last four trading sessions, Nifty has formed the second inside bar, which is also an engulfing candle. The current price pattern on a 75-minute chart is like a bullish flag. It reached the resistance level. A close above 16,650 will be the breakout of a bullish flag. The concern is that the volume is declining over the last two days because due to the F&O weekly expiry today, the volume is a little higher. In fact, volumes are lower in the consolidation period. The flag breakout must attract a higher volume; otherwise, the breakout may not sustain for a longer period of time. The broader market and the index breadth are still not so great. Today, the rally is mainly due to a rise in Reliance Industries and other stocks of IT sector. The 50-DMA is still 1.45 per cent away from the price. It is still below the 38.2 per cent retracement level (16,644) of the prior upswing. A decisive close above 16,644-16,650 can test the level of 16,885. We can project more than that for now. However, a close below 16,500 will resume the downtrend. For now, maintain a cautiously optimistic view for this weekend.
NIFTY DERIVATIVES:
Nifty Futures advanced about 462 points or 2.91 per cent since the last weekly expiry. Though it formed a strong bullish candle, Heikin-Ashi candles formed reversal bars with a small body, long shadows candle. On a 0.64 per cent gaining day, the open interest was up by 7.91 per cent, which indicates fresh longs were built up in the system. At-the-money strike, implied volatility is at 18.4, which declined a bit compared to the last week. India VIX was down by 10.55 per cent from 22.72 to 20.32 in the last five days. For the June monthly expiry, the put-call ratio (PCR) is at 1.3 and indicates slight bullishness. Meanwhile, the next weekly expiry PCR is at 1.01, indicating the neutral zone.
For the next weekly expiry, the total call open interest is at 6,28,874 while the total put open interest is at 6,34,793. The 17,000 strike has the highest call open interest of 50,489. At-the-money strike of 16,600 and deep-out-of-the-money strike of 17,500 have an open interest of above 40,000. Also, the 17,200 strike also has an open interest of 44,245. On the put side, the 16,000 strike has the highest open interest of 54,139 and is followed by the 16,500 strikes with 47,526 OI. On the call side, the 16,950 strikes has seen a 248.7 per cent increase in the OI. Barring the 16,450 strikes, all the strikes have seen long built-up. On the put side, the 16,650 strikes saw a 571.75 per cent increase in the OI. All strikes have seen short builtup. The current derivative data shows that Max Pain is at 16,600 for the next week. Meanwhile, the VWAP is at 16,544.
TECHNICAL RECOMMENDATION
KEI INDUSTRIES LTD. ..................... BUY ............... CMP ₹1302.25
BSE Code ...... 517569
Target 1 .... ₹1,410
Target 2 .... ₹1,440
Stoploss ...₹1230 (CLS)
Current Observation:
✓Established in 1968, KEI Industries Limited offers holistic wire & cable solutions. The products serve customers globally in over 45 countries via a rich network of 5,000+ channel partners. The company, which is headquartered in New Delhi, has over 38 branch offices and 21 warehouses across the country. The company offers an extensive range of cabling solutions. KEI manufactures & markets extra-high voltage (EHV), medium voltage (MV), and low voltage (LV) power cables. By serving both retail and institutional segments, KEI has emerged as a one-stop shop for products & services with its growing presence in the engineering, procurement & construction (EPC) services domain thereby, further strengthening its leadership position. The company’s foray into the EHV cable segment and EPC services for power sector projects further expands the opportunity horizon.
✓ The stock has formed an eight-week cup pattern and is trading at a prior pivot. Before that, it broke out of a double bottom pattern. The volume is above-average in the current week. It is trading above all the short as well as long-term moving averages. Currently, it is trading around 9.4 per cent & 25.7 per cent from 50-DMA and 200-DMA. The MACD line is above the zero line and about to cross the signal line. The weekly ADX (29.71) shows a solid strength in the uptrend. The +DMI is above the -DMI. The RSI is in a strong bullish zone since November 2020, and every decline is giving a good buying opportunity. The Elder impulse system has formed a series of strong bullish candles. Mansfield's relative strength indicator (1.25) shows a strong outperformance compared to the broader market. Buy this stock above Rs 1,320.
✓ Maintain a stop-loss at Rs 1,230. Besides, the short-term, as well as the long-term targets, are placed at Rs 1,410 and Rs 1,440, respectively.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of HDFC Bank Ltd at Rs 1,367.70 in issue no. 32 (dated May 30, 2022). Post our recommendation, it traded higher and remained above our recommended price level. The price structure is bullish while the technical parameters indicate strong strength in the stock. Thus, we recommend HOLD