Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty has lost 79.45 points since last weekly expiry. The very next day of the weekly expiry, Nifty lost about 139 points and followed another loss of 48 points the next day. However, on Wednesday, Nifty gained about 187 points because of huge short covering. With this sharp retracement, it was expected to continue to move upward. Interestingly, amid lack of new buying support and a fresh round of selling pressure, Nifty has given up almost 50 per cent of the gains of the prior day. Well, this volatility is due to the weekly expiry. Technically, even in the hourly chart Nifty is unable to make a higher high. Every effort to pullback has attracted a fresh selling pressure. Meanwhile, the IndusInd Bank Q2 results could not enthuse the market. In fact, both the PVTBank and PSUBank indices fell nearly 3 per cent each. All the components of Bank Nifty closed in negative territory. Because of Index heavyweight Reliance Industries’ 2.87 per cent gain, Nifty was able to trim the loss. However, Nifty formed an inside bar on Thursday. So, Wednesday’s high and low are critical resistance and support levels now. As long as these levels are not broken, it is better to be in sidelines. Only above 11,322 level, buy Nifty with 11,265 as stop loss.
As we discussed earlier, Nifty faced resistance at 38.2 per cent retracement level of 11,321. Once this level is cleared, the next level of resistances will be placed at 11,392 and 11,463. In any case, if Nifty falls below 11,090–11,060 level, the downward journey resumes again with a sharp cut. Below the 11,060 level, target is placed at 10,890-10,800. So, it is advised to keep an eye on the earnings as stock-specific activity will increase with a higher degree of volatility.
NIFTY DERIVATIVES: In a four-day weekly series, Nifty lost 95 points or 0.84 per cent at the expiry. Nifty moved in 316 points range on a high volatility note. Even on 186 points gain day, the open interest was 6.3 lower, indicating that the Wednesday’s rally is due to the huge short covering on the day before the weekly expiry. On Thursday, Nifty futures fell by 89.3 points and the Open Interest rose by 1.99 per cent, indicating fresh shorts are building. Currently, the open interest wise Put-Call Ratio (PCR) is at 0.89 and volume-wise PCR is at 1.08, indicating that the market is in a neutral zone. The total Call interest for 17th Oct weekly expiry is 6639900 and the total Put open interest is at 5949675. The maximum Call open interest seen at 11,300 strikes with 955650 and the next highest open interest is at 11,400 strikes with 802125. On the put side, the maximum open interest is at 11,000 and 11,200 strikes with 680250 and 656550 open interest respectively. From 11,200 to 11,450, Call Strikes witnessed writing and from 11,050 to 11,450, Put strikes witnessed long build-up. With current derivative data, the max pain is at 11,250.
STOCK STRATEGY BIOCON LTD. ....... BUY ...... CMP Rs240.20
BSE Code ...... 532523
Target 1 .... Rs258
Target 2 .... Rs264
Stoploss .... Rs225 (CLS)
✓ Current Observation: Biocon has broken out of 33 days flat base and double bottom pattern with good volumes. It has also broken out of the downward channel.
✓ The narrowed Bollinger Bands and closing above 20DMA are indicating an explosive move in this stock.
✓ The leading indicator RSI reached to this year’s high and made a new swing high. The MACD line is above the zero line and the signal line. The increasing histogram is suggesting the momentum in this stock is building up.
✓ The stock is trading above the short and medium term moving averages. Even the +DI is also moving above the -DI.
✓ Interestingly, it has also moved above the Ichimoku cloud by clearing all resistance points. So, buy this stock at Rs. 240.20, with a stop loss of Rs. 225. The target is placed at Rs. 258 - 264 in the medium term.
REVIEW OF STOCK STRATEGY We had recommended our readers to buy the stock Hindustan Petroleum Corporation Ltd. at Rs. 323.10 in issue no. 50 (dated October 07, 2019). Post our recommendation, the stock has been witnessing consolidation along with low volume; although the stock is still trading above its short and long term moving averages. The technical parameters of the stock still look promising. We would advise our readers to hold this stock with a stop loss of Rs. 305 on closing basis, as the stock is likely to move higher from the current levels.