Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : After two days of decline, Nifty formed a higher high and a higher low candle. It formed a shooting star-like candlestick pattern, indicating a trend's exhaustion.
As the shooting star has been formed at the confluence of swing high, the probability of moving higher is quite remote.
Though it made a higher high, it failed to close above the 38.6 per cent retracement level of the prior downside move. It climbed 223.60 points in the last five trading sessions. The benchmark index has declined 810.15 points or 4.88 per cent in the month of June. For the last 18 trading sessions, the 21-EMA is acting as a strong resistance. As mentioned earlier, there are resistances at 15,988 while 16,178 are those resistances that are placed in the gap zone. The 50-DMA is placed at 15,247. Unless the index clears these resistances, we can assume that the current upside move is only a counter-trend.
Meanwhile, the trend is indecisive because of the monthly expiry. Firstly, it has to clear the last Monday's high of 15,927, which is a bearish belt hold candle. The RSI is below 50, which declined for the third straight day. It failed to clear the sloping resistance line. On a 75-minute chart, the index has broken the upward channel support with a big bearish candle. As it is within the moving average ribbon, we can assume that the index is in a neutral zone. In any case, if it declines below 15,725, it will be negative and resume the downtrend. It is better to be cautious on the upside. Avoid aggressive leveraged positions.
NIFTY DERIVATIVES:
Nifty futures declined 380.40 points or 2.35 per cent in the June series. It was up by 205.70 points or 1.32 per cent since the last weekly expiry. The rollovers stood at 67.71 per cent, which is less than the last month (78.90 per cent), three-month average (76.90 per cent), and six-month average (76.91 per cent).For the July series, the put-call ratio (PCR) is at 1.3. Above 1.2, the PCR level shows a swing high in the price. For the next weekly expiry, at-the-money implied volatility is high at 21.9. On Wednesday, it touched 25.25 levels. India VIX is up by 4.5 per cent since the last weekly expiry to 21.84 level.
For the next weekly expiry, the total call open interest is at 6,46,177 while the total put open interest is at 6,82,156. On the call side, the highest open interest is at 16,000 strikes with 63,820 OI, followed by an at-the-money strike of 15,800 strikes with 62,060 OI. The 16,300, as well as 16,200 strikes, also have a significant open interest of 42,690 and 41,113. On the put side, the maximum open interest is at an ATM strike of 15,800 strikes with 59,019 OI, followed by 15,500 strikes with 53,639 OI. The 15,700, as well as 15,600 strikes, also have significantly higher open interest of 49,964 and 40,137. All the Call strikes saw a short build-up while the Put strikes witnessed a long build-up. The 15,750 strikes call open interest increased 194 per cent. On the put side, the 15,800 strike saw a 183 per cent rise. For the next week, Max Pain is at 15,800 while VWAP is at 15,795.
TECHNICAL RECOMMENDATION
JAMNA AUTO INDUSTRIES LTD...................... BUY ............... CMP ₹122.10
BSE Code ...... 520051
Target 1 .... ₹140
Target 2 .... ₹145
Stoploss ...₹108(CLS)
Current Observation:
✓Jamna Auto Industries Limited is the manufacturer of suspension for commercial vehicles. The company was the first to introduce parabolic springs in India. It manufactures a full range of suspension solutions for the commercial vehicle industry. The company has eight strategically-located manufacturing facilities at Yamuna Nagar (Haryana), Malanpur (Madhya Pradesh), Jamshedpur (Jharkhand), Pune (Maharashtra), Chennai, Pillaipakkam & Hosur (Tamil Nadu), and Pant Nagar (Uttarakhand) (under subsidiary company). It has an indigenous R&D centre with capabilities.
✓ Technically, the stock has formed a 23-week cup & handle pattern. It is trading just at the prior pivot. The relative price strength (RS) is placed at 79 and at the new swing high, which is a bullish sign. The stock is trading above all the key moving averages. It is 10.66 per cent above the 50-DMA and 17.55 per cent above the 200-DMA. The short and mediumterm averages are in an uptrend. The MACD has given a fresh bullish signal while the RSI is above the prior swing highs and entered into a strong bullish zone. The ADX (29.55) shows a solid strength in the trend. The Elder impulse system has formed strong bullish bars on the daily as well as the weekly charts. The TSI and KST indicators are giving a bullish signal. It is also above the anchored VWAP resistance. In short, the stock is trading at a pivot. A move above Rs 125 is positive, and it can test Rs 140-Rs 145 in the short to medium term. Maintain a stop-loss at Rs 108.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of TVS Motor Company Ltd at Rs 772 in issue no. 36 (dated June 23, 2022). As per our expectations, the stock traded firmly above our suggested buying price and remained strong throughout the week. We had given a ‘Book Profit’ message at the level of Rs 820.10 via our SMS service on June 28, 2022. Thus, traders, who had taken positions according to this strategy, would have made a decent profit