Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
After a roller-coaster ride, Nifty formed a long-legged small body candle. Today's price action reflects the big volatile days that are approaching. Though it closed positively, both long and short positions triggered stop-losses.
In the last five trading sessions, Nifty gained 196.05 points or 1.27 per cent. It has formed another lower-low candle and traded below Tuesday's high. Once again, Nifty faced resistance at 8-EMA. The price failed to move above Tuesday's high but RSI did.
On a 75-minute chart, Nifty faced resistance at a sloping trend line. It closed in a moving average ribbon, showing neutral bias. The MACD line moved just above the zero line. Nifty is moving in a counter-trend pattern as long as the level of 15,385 is protected with a positive bias.
Volatility is the nature of the market. Even in volatile conditions, follow the market price action. Nifty failed to close above the 23.6 per cent retracement level (15,563) of the prior downtrend. On Wednesday also, it faced resistance at the same level. For an upmove to continue, it has to clear this resistance first.
As discussed earlier, above this level, the index can test the gap area or the last week's high of 15,886. A close below today's low of 15,367 will resume the downmove. The current counter is five days old. Expect this consolidation to continue for another 2-3 days.
NIFTY DERIVATIVES:
Nifty futures gained 243.2 points or 1.59 per cent since the last weekly expiry. It registered the highest volume in the last four days. After several weeks, the derivative segment traded with the highest volatility. Even then, the volatile and neutral strategy hit the stoplosses on both sides. The implied volatility increased to over 22 during the day and settled at 19.9. Though Nifty closed with 1 per cent gain, the open interest declined 4.57 per cent. Even though the index closed higher, the deep out-of-the-money call premiums ended in a negative tone. The put-call ratio is at 0.99, which indicates neutrality. India VIX plunged 8.69 per cent since the last weekly expiry and got settled at 20.88.
For the monthly expiry, the total call open interest is 12,28,107 while the total put open interest is 12,13,542. The highest call open interest is seen at 16,000 strikes with 1,12,114 OI, followed by a deep-out-of-the-money strike of 16,500 with an OI of 94,159. The 15,700 and 15,800 strikes also have the highest open interest of 61,552 & 59,337, respectively. On the Put side, the 15,500 strike has the highest open interest of 1,05,684 and is followed by a deep out-of-the-money strike of 15,000 with 77,716 OI. The 15,200 strike has an open interest of 62,505 while the 15,300 strike has an OI of 59,457. On the call side, 15,300 to 15,500 strikes witnessed shortcovering while the remaining strike has seen long built-up. On the Put side, all the strikes saw short built-ups. The derivative data shows that Max Pain is at 15,700 while VWAP is at 15,518.
TECHNICAL RECOMMENDATION
TVS MOTOR COMPANY LTD..................... BUY ............... CMP ₹772.00
BSE Code ...... 532343
Target 1 .... ₹814
Target 2 .... ₹835
Stoploss ...₹721(CLS)
Current Observation:
✓TVS Motor Company is the third-largest two-wheeler company in the country. It has a capacity to manufacture 4.95 million vehicles. The company is the second-largest exporter in India. It exports vehicles to over 60 countries. It manufactures mopeds, scooters, motorcycles, and racing bikes. TVS Motor has four manufacturing plants, three in India at Hosur (Tamil Nadu), Mysore (Karnataka), and Nalagarh (Himachal Pradesh) while one in Indonesia at Karawang.
✓ The stock is trading near its pivot. It has formed a 31-week cup formation with 37 per cent depth. On the daily chart, it decisively trades above the 20-DMA. The contracted Bollinger Bands indicate an impulsive move on the upside. It is also trading above the key moving averages. It is 20 per cent above the 200-DMA and 10.72 per cent above the 50-DMA. The RSI is in a strong bullish zone. The MACD is about to give a bullish signal. The +DMI moved above the -DMI from an influx point. The relative price strength is fair at 77, which indicates stronger price performance.
✓ The Elder impulse system has formed strong bullish bars. The TSI and KST are about to give a bullish signal. It’s trading above the Anchored VWAP resistance. In short, the stock is about to break the bullish pattern. A move above Rs 767 is positive and it can test the prior high of Rs 814. Maintain a stop-loss at Rs 721. Above Rs 814, continue with a trailing stop-loss.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Varun Beverages Ltd at Rs 777.75 in issue no. 35 (dated June 16, 2022). Post our recommendation, it traded higher and hit a swing high of Rs 805.60. However, bad sentiment in the market dented the stock’s performance and it plunged below our recommended level. Nevertheless, the stock received strong buying interest at lower levels and is currently, trading above all its key moving averages. It is technically strong and thus, we recommend HOLD.