Technical Analysis

TECHNICAL RECOMMENDATION

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : On the day of the weekly expiry, Nifty opened at the sloping trend line resistance with a big positive gap of 185 points. For the second consecutive session, the open is almost at the highest point. As we had projected earlier, the current rally extended to 17,720. However, the question is, will it sustain at the current levels? The prior major swing high is at 18,115. On Thursday, Nifty traded in just 87-point range. On the weekly derivative expiry, this small intraday range is a surprise. On the lower time intraday chart, Nifty has formed lower high and lower low bars. Nifty is moving higher but Elders Impulse System has not formed a bullish bar. Currently, the rally has extended 8.2 per cent above the 50-DMA. The negative divergence still persists in major indicators. The daily RSI has tested the level of 80. Historically, Nifty has never sustained above the zone of 80. The MACD histogram, further declining on a bullish day, shows the loss of momentum in the trend. After a 16.65 per cent rally, if the index trades at the strong resistance zone, it is better to have a cautious approach! In case Nifty opens with a gap-down on Friday and closes negatively, we will get a confirmation for the reversal because today's evening star will get the bearish confirmations. There are no bearish signs available to take immediate short positions. At the same time, the fresh long positions cannot be suggested. As a long weekend is on the cards, stay light in positions.


 

NIFTY DERIVATIVES: Nifty futures advanced 269 points or 1.54 per cent since the last weekly expiry. For the last four trading sessions, the volumes were continuously declining and recorded the lowest since January this year. The open interest is up by just 1.75 per cent today. The put-call ratio (PCR) is at 1.38 for August expiry. For the next weekly expiry, the PCR is at 1.16. India VIX is down to 18.35. The Implied Volatility has also declined to 13.59, which is the lowest since April. This may need a cautious approach and it also indicates that another round of impulse move is on the cards! For the next weekly expiry, the total call open interest is at 6,83,634 while the total put open interest is at 7,93,683. The maximum open interest is the at-the-money strike of 17,700 with 73,277 OI, followed by 17,800 strikes with 57,140 OI. The 18,000 strike also has a significant open interest of 54,841. On the Put side, the 17,500 strike has the highest open interest of 60,602, followed by the deep-out-of-the-money strike of 17,000 with 49,642 OI. The 17,600 strike also has an open interest of 39,101. The 17,950 to 18,150 strikes on call side witnessed short built-up while the 17,600 to 17,900 strikes saw a long build-up. On the Put side, almost all the strikes have seen a short build-up. The 17,700 strike Put saw a 4,039 per cent rise in the open interest, followed by the 17,650 strike with a 3,749 per cent increase. The 17,700 strike call witnessed a 421 per cent increase in the open interest, followed by the 17,750 strike with a 294 per cent increase. Meanwhile, Max Pain is at 17,650 while VWAP is at 17,659.
 

STOCK STRATEGY 

INDRAPRASTHA GAS LTD. ................... BUY .............. CMP ₹408.00

BSE Code : 532514
Target 1 : ₹429
Target 2 : ₹462
Stoploss :₹387 (CLS)

•  Current Observation:
Indraprastha Gas Limited (IGL) was incorporated in 1998 as a joint venture between GAIL, BPCL, and Government of National Capital Territory of Delhi. The company took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited. The project was started to lay the network for the distribution of natural gas in the NCT region of Delhi to consumers in the domestic, transport, and commercial sectors. The company has reported a 72 per cent rise in the net profit to Rs 420.86 crore during June quarter. The total gross sales rose by 157 per cent to Rs 3,519 crore from Rs 1,372 crore. The EPS stood at Rs 6.01 with an increase of 72 per cent. The return on equity (RoE) stands decently at 19 per cent.

•  Technically, the stock has broken out of a 22-week consolidation. Before the consolidation, it declined 47 per cent from its lifetime high. With the current consolidation breakout, the stock has entered Stage 2. The massive volume confirms the breakout. Currently, it is trading 11.4 per cent above the 20-DMA and 12.25 per cent above the 50-DMA. Both are in an uptrend. Besides, the stock is now trading at the 200-DMA of Rs 404.75. The RSI is in a strong bullish zone. The MACD line moved above the zero line, and the histogram shows bullish momentum. The KST and TSI indicators have given bullish signals. In short, the stock has broken out of a Stage-1 base. Buy this stock above the zone of Rs 403-Rs 408. Maintain a stop-loss at Rs 387. The short-term target is Rs 429. Above this, it can test Rs 462.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Adani Power Ltd at Rs 347.10 in issue no. 42 (dated August 4, 2022). Post our recommendation, the stock faced a nominal correction of about 4 per cent but witnessed strong buying interest at lower levels. Thus, strong support levels are placed below, and the stock is back to our recommended price. The technical parameters remain bullish, and hence, we recommend HOLD.