Technical Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : 
Nifty decisively declined below the prior lows of 15,671 and 15,735. It also came out of the last two days of indecisiveness. The opening euphoria fizzled out within minutes of opening. Nifty has formed a big engulfing bar. The importance of today's move is that the index made a new swing low. In the last five trading sessions, it declined 903 points or 5.55 per cent, which is a massive fall. It also made a new 52-week low. It declined over 17.5 per cent from the high of October 2021. As we mentioned earlier, this fall is going to be a ferocious one. We also mentioned that the next three weeks are going to be crucial for the market. The bears will dominate with massive selling. At the same time, any gap opening will not sustain, like today. Every rally will be sold into. Our target of 15,323 is almost achieved. The RSI enters into the oversold or a strong bearish zone. The rising ADX (20.48) shows the strengthening of bearish trend. The -DMI, almost at the previous high, is an indication that bulls have lost their grip on the market. The Elder impulse system has formed a strong bearish bar on the weekly timeframe. Over 75 per cent of Nifty 500 stocks declined below the 200-DMA and many of them are trading over 30 per cent lower from their all-time high (ATH).

However, if the level of 15,323 is protected, the index may bounce towards the level of 15,900-16,000. Look at the positive divergences on a lower timeframe at this level to take long positions. After a massive decline, Nifty may form an inside bar on Friday. However, a weekly close below 15,323 will be a big negative for the market. Today's high of 15,863 will act as crucial resistance for now.

NIFTY DERIVATIVES:
Nifty futures declined 938.05 points or 5.76 per cent since the last weekly expiry. It closed in the negative territory on all five days. A big gap-down on Monday by 453 points and another big fall on the weekly expiry day (today) are showing the serious bear grip on the market.

In fact, today, it declined 537 points from the day’s high. The 18.5 per cent increase in the open interest shows that huge shorts were built-up in the system. The implied volatility (IV) climbed sharply up to 24.2. With this, the option premiums have become expensive, particularly on the put side. Today, India VIX touched 28.13, which is the highest after March 9. During the last five days, India VIX has been up by 19.48 per cent to 22.87. The put-call ratio (PCR) is at 1.09 for monthly expiry. Meanwhile, for the next week, the PCR is just at 0.46, which indicates that call options are written in huge quantities.

For the next weekly expiry, the total call open interest is at 10,81,150 while the total put open interest is at 5,03,871. The deep-out-of-the-money strike 16,000 has the highest open interest of 81,025, followed by the 15,700 strikes with 73,069 OI. The 15,800 strike also has a significantly higher open interest of 57,929. On the put side, the 15,000 strike has an open interest of 48,915, followed by the deep out-of-the-money strike of 14,500 with an open interest of 35,412. Near the money strike, 15,300 also have a significant OI of 30,749. On the call side, 15,650 to 14,950 strikes witnessed a huge short built-up. Meanwhile, the 15,550 and 15,250 strikes also saw a 6,586 per cent and a 5,285 per cent increase in the open interest. On the put side, long positions were built up. The 15,350 strikes saw a 524 per cent increase in the open interest. Max Pain is at 15,500 while VWAP is at 15,551. 

TECHNICAL RECOMMENDATION

VARUN BEVERAGES LTD. ..................... BUY ............... CMP ₹ 777.75

BSE Code ...... 540180
Target 1 .... ₹835
Target 2 .... ₹855
Stoploss ...₹716(CLS)

✓ Current Observation: Varun Beverages Ltd (VBL) is a key player in the beverages industry. It operates in six countries. The Indian subcontinent (India, Sri Lanka, and Nepal) contributes 81 per cent of the revenues. It has had a strategic partnership with PepsiCo for the past 30 years. It produces 80 per cent of Pepsico volumes. Currently, it operates across India in 27 states and seven union territories. The company has a strong distribution network of over 2,000 depots with more than 2,000 primary distributors. During FY22, it opened a new beverage manufacturing plant in Bihar along with a new backward integration plant in Jammu & Kashmir.
✓ Technically, the stock made a new lifetime high on June 15. It is clearly in an uptrend and making higher highs & higher lows. It is above all the key moving averages. The stock is comfortably placed above its key moving averages i.e. around 9 per cent as well as 24 per cent from 50-DMA & 200-DMA, and they all are in the uptrend. It is 4.56 per cent above the 20-DMA. As it is trading in a tight range with long shadows, any decisive close above the range will be a very strong positive in this market condition. The weekly, as well as the daily RSI and MACD, are in the bullish zone. The ADX shows a solid strength in the trend. The Elder impulse system has formed a series of bullish bars. The TSI and KST indicators have given a bullish signal. In short, the stock is trading at new highs. Buy this stock above the zone of Rs 770-Rs 790. Maintain a stop-loss at Rs 716. The short term target is Rs 835, while its medium-term target is placed at Rs 855. 

REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Bharat Dynamics Ltd at Rs 818.15 in issue no. 34 (dated June 09, 2022). Post our recommendation, it traded higher and hit the swing high at Rs 853.10. However, bad sentiment in the market has dented the stock’s performance and it slipped below our recommended level. However, the stock is technically strong and is above all its key moving averages. The relative strength of the stock is good, and thus, we recommend HOLD.