Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : The domestic equity market rallied 2.5 per cent in the last two trading sessions. The benchmark index gained over 500 points from Wednesday's low. Thursday's huge gap opening, that too on the day of the monthly expiry, came as a surprise!
Interestingly, Thursday’s rally of 287 points did not attract volume as it recorded less than the previous day. On an extremely positive day, this data gives some suspicion. Nifty closed above the prior swing high of June 03, 2022. After staying within Bollinger Band for the last three days, Nifty has once again closed above the upper Bollinger Band.
Furthermore, with the robust move of the past two trading sessions, Nifty has retraced over 50 per cent of the current eightmonth-long downtrend. Nifty also broke the upward channel. The 200-DMA is placed at 17,029, which may be the immediate target and resistance too. Nifty may experience strong resistance at 16,983, which is a 61.8 per cent retracement level of the most recent major downswing. Hence, the zone of 16,983-17,029 will be the immediate resistance. On the downside, only a close below Thursday’s low of 16,746 will be the first sign of weakness. As Nifty over extended the rally, it is better to be with a cautiously positive bias. Having said that, there is no scope for shorting now as the sentiment is strongly bullish.
NIFTY DERIVATIVES:
Nifty futures gained 1,148.50 points or 7.28 per cent in July series. It is also up by 322 points or 2 per cent since the last weekly expiry. Nifty has ended its three months of negative closing on a monthly basis. The put-call ratio (PCR) for August monthly series is at 1.5 while for the next weekly expiry, it is at 1.37, the highest for a weekly expiry in recent times. The rollovers were recorded at 71.15 per cent, which is less than the three-month average (77.27 per cent) and six-month average (76.23 per cent). The implied volatility collapsed to 15.2.
For the next weekly expiry, the total call open interest is at 6,56,886 while the total put open interest is 8,99,773. The at-themoney strike 17,000 has the highest open interest of 60,226 and is followed by the deep out-of-the-money 18,000 strikes with 52,876 OI. The 17,500 strike also has a significant high open interest of 42,633. On the put side, the 16,600 strike has the highest open interest of 66,568, followed by the 16,800 strikes with 63,668 OI. The 16,700 strike also has an open interest of 62,117. On the put side, there is a significant increase in open interest. The 16,850 strike OI increased by 9,333 per cent while the 16,950 OI, by 5,596 per cent. On the call side, the 16,950 strike OI increased by just 192 per cent. On the call side, the long build-up was seen from 16,800 to 17,250 strikes. Some strikes witnessed the short-covering. On the put side, across the strikes, a huge short build-up was seen. The current derivatives data shows that Max Pain for the next week stands at 16,800. The VWAP is at 16,862.
STOCK STRATEGY
FEDERAL BANK LTD. .............. BUY ............. CMP ₹107.35
BSE Code : 500469
Target 1 : ₹123
Target 2 : ₹136
Stoploss : ₹ 96 (CLS)
• Current Observation: Federal Bank is a leading private sector mid-sized bank in India. It is one of the preferred banks for NRIs as well as for small & medium businesses. Its 'digital at front and human at core' proposition gives an advantageous position. It continues to thrust into new geographies and new market penetration. By adopting technology for client acquisition, it is the first bank to be enrolled as a professional clearing member in all three major commodity exchanges and introduced a first-ofits-kind app-based doorstep gold loan facility.
• Technically, the stock is trading above the prior pivot. It has broken out of a 15-week cup pattern with a massive volume. The cup depth is 21 per cent. The stock also broke the 39-week consolidation. It has a better RRG relative strength.
• After the last week's breakout, it consolidated for five days and moved higher. It is trading 17.38 per cent above the 50-DMA and 8.24 per cent above the 20-DMA. The +DMI is above the -DMI and ADX, and the ADX is rising. The weekly MACD and RSI are in the strong bullish zone and have a bullish momentum. The TSI and KST indicators show a bullish setup. It is also above the Anchored VWAP.
• In short, the stock is trading above the prior pivot. A move above the zone of Rs 106-Rs 109 is positive, but keep a stop-loss of Rs 96. Besides, the short & medium-term targets are placed at Rs 123 and Rs 136, respectively.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Hindustan Aeronautics Limited at Rs 1,847.25 in issue no. 40 (dated July 21, 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 1,928.85 via our SMS service on July 27, 2022, and also, updated the same on our ‘Flash News’ App. Thus, traders, who had taken positions according to this strategy, would have made a decent profit.