Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty is moving in sequence of higher and high since the last weekly expiry. It gained more than 351 points or 3.13 per cent continuously in the last five trading sessions. At first, it struggles to clear the 61.8 per cent retracement for two days. Once it cleared, the market witnessed a sharp bounce. It also cleared the 61.8 per cent retracement level of June 3rd to August 23rd, 2019 fall. With the Thursday’s move, Nifty has managed to close near about the 23rd September closing levels. Now it is clearly above all the long term moving averages. The 50DMA turned upside.
The bears attempted to pull down the market many times during the week but failed miserably. There were many Doji formations during the week but the bulls dominated the market, closing higher than the previous day. On Thursday, October 17, the volumes are better than the previous day. Except Nifty IT, all the sectoral indices participated in the Thursday’s sharp rally. The beaten-down stocks also gained a lot on a weekly expiry day. The RSI is also in upward channel. The MACD line is above the signal line and the histogram suggesting the bullish momentum. The market breadth is also improving. Now, the critical downward sloping trend line resistance is placed at 11620 areas and prior pivot is at 11695. If these levels are cleared then the next target is placed at 11790. In any case, if it falls below the 11370 level, then the market takes a breather for some more days. For the long positions, keep a trailing stop loss at 11540- 11480 levels.
NIFTY DERIVATIVES: This is one of the best weekly expiry in recent days. Nifty futures gained 436.30 points or 3.91 per cent in the last week. The rollovers increased to 8.57 per cent and the open interest up by 5.32 per cent. More than 1 per cent gain and the rising open interest indicates that the long positions are building up. The open interest-wise Put-Call Ratio (PCR) for October 24th weekly expiry is at 1.33 per cent. The volume-wise PCR is at 1.21 per cent. This indicates that the upside is limited. The maximum Call and Put open interest is at 11500 strikes. The total call open interest is 6,999,300 and the total put open interest is 9,324,225. Currently, 11400 to 11800 strikes Calls have long built up and Put have the shorts build up. Nifty is trading with 11.64 implied volatility at present. The India VIX fell by 2.95 per cent to 15.87 on Thursday. With the current derivative data, the Max Pain is at 11500.
STOCK STRATEGY
BAJAJ FINANCE
BUY .......................... CMP Rs4095
BSE Code ...... 500034
Target 1 .... Rs4260
Target 2 .... Rs4400
Stoploss .... Rs3950 (CLS)
✓ Current Observation: Bajaj Finance has broken out of the bullish flag with big volumes. Now the stock is approaching flat base pattern resistance area and lifetime highs.
✓ Since the stock is near to the lifetime highs, it is trading above the all short and long term moving averages. The bullish flag pole height is almost 830. The flat base is formed in about Rs. 270 range. Any close will lead to a sharper upside move in the stock.
✓ The leading indicator, RSI, has broken out of the flag pattern and reached into a highly bullish zone. ADX is also showing the strength in the trend. The stock is meeting all major CANSLIM characters.
✓ Its relative price strength (RS) is as high as 96 and the EPS strength is at 97. The stock is attracting good volumes and institutional investors are increasing their stake in the company. Institutional holding is increased by 1.60 per cent in the last quarter.
✓ Its Return on Equity is at 20 per cent. And the consistency in sales and earnings growth is also at attractive levels. Buy this stock at Rs 4095 with a stop loss of Rs. 3950. The targets is open to Rs. 4260 in the short term and Rs. 4400 in the long term.
