Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY :
Nifty bounced again with a short covering in the wake of weekly expiry. It also tried to come out of the oversold condition before the event (general election results). But, since last two days, it has been moving within the Tuesday’s range and unable to provide confidence to the bulls. It is still trading below all the crucial short term moving averages. Nifty tested the earlier fourth-month-long consolidation breakout point, which we anticipated much earlier. As we pointed out earlier, in case Nifty falls below the 11000 level, the market will be in a serious bearish grip. If the four days range of 11338-11138 breaks on the upside, then Nifty will face resistance at the 11413 level. Only above this level, the bears may lose control of the market. The alternate positive and negative days reflect the nervousness in the market before the event risk. Just one more trading session before the exit polls, and markets may witness huge volatility till election results next Thursday. We can expect at least 500-600 point volatility in the next one week. The expected range is 11000-11500 for the eventful week. In any case, if this range breaks, expect a sharp move, whichever the breakout direction. In view of the event risk, especially on event days, technicals may not work accurately as human emotions would be involved massively. Monday and Thursday would be critical for the markets as exit polls and actual results come in. Traders are advised to adopt a cautious approach and adhere to strict money management rules.



NIFTY DERIVATIVES:
Nifty lost just about 34 points since the last expiry. Out of the five trading sessions, trading in four sessions was within the range, with volatility of at least 100 points in a day. It also tested the previous breakout point and held for the last four days. Before the event, the traders are indecisive to move on either side. The rollovers are higher than the weekly averages. Nifty rollovers are seen at 10.93 per cent, which is higher than the average in recent weeks. The Open Interest (OI) rose by 3.8 per cent. The Put-Call Ratio (PCR) is at 1.18. The OI-wise PCR for the next week is at 0.65 and the volume-wise OI is at 0.70. This shows that the bounce will continue for another two-three days. The highest Call OI for the next week series is seen at 12000 strike with higher additions of contracts. The OI at this strike is 5,61,375. On the Put side, the highest OI is seen at 11200 strike with 3,57,825 and the next high OI is at 11000 strike. Most traders are betting at out of the money (OTM) options as they expect it will become a multi-bagger. Nifty IV is at a year high with 33.33. With this evidence, one can expect the highest level of volatility. The India VIX reached highest level since May 2014 and is currently at 28.4. Generally, before the event, VIX will reach the highest point and, after the event, it will collapse to the mean level. With these derivative points, traders must adopt hedging strategy keeping in mind the expected volatility.

STOCK STRATEGY

TITAN COMPANY .................................. BUY ........................ CMP Rs.1192

BSE Code 500114
Target 1 .... Rs.1265 
Target 2 .... Rs.1295
Stoploss ...Rs.1106 (CLS)



✓ Current Observation: Technically, the stock closed at lifetime highs and the previous pivot. The stock is on a clean uptrend making higher highs. In the May 6 week, it breached the 200-DMA and the weakness was limited to just one week. Later on, it bounced with consistent volumes. The upside breakout on Thursday with higher volumes confirms the validity of the breakout.
✓ The leading indicator RSI also came out of the downward channel. The MACD is above the signal for two days and the histogram confirms the upward momentum in the stock. The ADX is above 30 and above +DI and -DI. As some oscillators are in an overbought condition, any dip can be used as an opportunity to buy this stock.
✓ The stock is trading above all the moving averages and meeting all the CANSLIM criteria. Its price strength is 90, with great buyers' demand.
✓ Buy this stock at Rs. 1192 with a stop loss of Rs 1106. The target is open towards Rs 1265-1295

REVIEW OF STOCK STRATEGY

We had recommended buying the stock of Blue Star at Rs 758.85 in issue no. 29 (dated May 13, 2019). Post our recommendation, the stock did not sustain at higher levels as selling pressured emerged in the market. However, the stock is still trading above its 50-DMA and 200-DMA level. The technical parameters of the stock still look promising. We would advise our readers to hold this stock with a stop loss of Rs 700 on a closing basis, as the stock is likely to move higher from the current levels.