Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
The equity markets were suddenly gripped with fresh inflation and recession fears across the world. The domestic benchmark index - Nifty plunged nearly 2.5 per cent from its last week's high. For the last four days, the index has been forming lower lows and lower high candles. Most importantly, it has also retraced about 38.2 per cent of the previous upswing. With Thursday's fall, the counter-trend rally has ended. Nifty is decisively trading below the 50-DMA. Currently, the 20-DMA is 0.8 per cent away, which is at 15,803. Besides, Nifty is underperforming compared to the broader market. Its relative strength ratio as well as the relative momentum are less than 100 and declining sharply. A majority of Nifty 50 stocks are lagging in their momentum. As very few sectors are in the leading quadrant, there is a serious lack of leaders.
On the weekly chart, Nifty is still trading within the previous week's range. It failed to cross the last week's high. Earlier, the upswings were limited to 14-19 sessions. Like the previous swing, the current swing also matured in 14 sessions. The daily MACD line declined below the zero line. The last hour's recovery is because of the short-covering, which is not trustworthy. For now, the market conditions have changed from negative to sideways. It is not the right time to consider aggressive longs; so, it’s better to focus on stockspecific action. Talking about the levels, 15,800 is likely to act as immediate support while on the upside, the first hurdle stands around the level of 16,120, followed by 16,244. Only a close above the level of 16,244 would open gates towards the levels of 16,700-16,800 in the medium term. A failure to surpass the 16,244 level would indicate sideways action between 15,800 and 16,250 levels.
NIFTY DERIVATIVES:
Nifty futures slipped 207 points or 1.28 per cent since the last weekly derivative expiry. Except for last Friday, the index closed in the negative territory for four consecutive days. The 7.99 per cent rise in the open interest on a declining day shows that fresh shorts were built-up in the system. The volatility index i.e. India VIX dipped 4.55 per cent to 18.34. The implied volatility (IV) has also declined to 16.54 from 17.53 since the last weekly expiry.
For the next weekly expiry of July 21, the call open interest stands at 7,27,590 while the total put open interest is at 6,27,797. On the call side, the maximum OI lies at 16,000 strikes, which is about 77,663 OI. It is followed by the 16,600 strike, which has 60,066 contracts outstanding. On the put side, the 16,000 strike holds a maximum OI of 41,361, which is followed by the OTM strike of 15,500 having 39,202 OI. The PCR for the next weekly expiry is at 0.86, indicating that calls have been written more aggressively. All the call options witnessed increasing shorts while puts of near strikes have already been bought. Max Pain is at 16,000 while the VWAP lies at 15,959.
TECHNICAL RECOMMENDATION
HIMADRI SPECIALITY CHEMICAL LIMITED.......................BUY...................... CMPRs88.20
BSE Code ...... 500184
Target 1 .... Rs98
Target 2 .... Rs105
Stoploss ...Rs81 (CLS)
Current Observation:
✓Himadri Speciality Chemical Limited (HSCL) is a whollyintegrated speciality carbon company leveraging its deep knowledge on one of the most versatile substances - carbon. The company has established itself as one of the world's most extensive value chains in the carbon segment. With an emphasis on R&D and a focus on maximum utilisation of resources, it is aiming to emerge as one of the leading speciality carbon chemicals conglomerates globally with an unmatched product portfolio and cutting-edge research best-in-class technical capabilities. The company has seven manufacturing facilities in India along with a state-of-the-art manufacturing unit in China. Its product portfolio includes carbon black, coal tar pitch, naphthalene, refined naphthalene, advanced carbon material, SNF, speciality oils, and power.
✓ Technically, the stock has broken out of a 13-week cup pattern of Stage 2. For the past two weeks, it has been registering massive and above-average volume. Earlier, it had broken out a 103-week Stage 1 base and is rallying since then in a staircase manner. Currently, the stock has retraced 38.2 per cent of the 2018-22 downtrends. It is trading above all the key moving averages. It is 30.74 per cent above the 40-week moving average and 40.78 per cent above the 30-weekly average. It is also 32 per cent above the 10-week average. All the moving averages are in the uptrend. The 20-period weekly RSI, which is above 50, is in a strong bullish zone. The weekly MACD has given a fresh buy signal. The weekly ADX (23.38) shows a strengthening uptrend. It is also trading above the Anchored VWAP resistance. The relative price strength (RS) rating is as high as 88, showing outperformance compared to the broader market. The Elder impulse system has formed a series of strong bullish candles on the weekly chart. The KST and TSI indicators are also in a bullish setup. In short, the stock is in a strong bull trend. A move above the zone of Rs 90-Rs 92 is positive and it can test Rs 98. Maintain a stop-loss at Rs 81.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Tube Investments of India Ltd at Rs 2,008.85 in issue no. 38 (dated July 7, 2022). Post our recommendation, the stock traded higher and hit a swing high of Rs 2,095. However then, it witnessed nominal correction at higher levels, and is currently, trading near to our recommended buying level. The stock is technically strong and is above all its key moving averages. Thus, we recommend HOLD.