Technicals
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty retraced sharply after taking support at 50-EMA and formed a mostly bullish candle with almost no shadows. This is also a bullish engulfing at an intermediate low. A Doji on Tuesday indicated the tiredness of the bears and followed a flat close, which also suggested that downfall is halted for the time being. Almost 200-point volatility on Wednesday created a long-legged small body candle with increased volumes. On Thursday, it traded within the range of the prior day for the most part of the trading session, but in the last hour, it surpassed prior day high and closed above the 11,800 mark. Though the Nifty retraced above 38.2 per cent (11,820) from the bottom, the volumes have not improved. Even though the market breadth has improved, the number of stocks reaching 52-week lows have increased to a record level in recent times as 383 stocks hit the year’s low. Most of the badly beaten down stocks reacted on Thursday, and at the same time, as it was the day of the weekly derivative settlement, the short covering led to more than 100point rally. Let us wait and watch as this rally can go beyond the 11,900-11,940. Closing above the 11,940 level, which is 61.8 per cent retracement of the recent fall, will take the market above the 12,000 level. Currently, it is advised to avoid short positions as long as Nifty trades above the 11,820.
NIFTY DERIVATIVES: Nifty lost 80 points or 0.67 per cent since last weekly expiry. It actually recovered more than 200 points from the bottom of 11630 and almost tested the May 20 gap area. All the sectors participated on the weekly expiry day's 1.26 per cent rally with 3.46 per cent increase in Open Interest (OI). Just a week before the monthly expiry, the rollovers rose to 18.01 per cent. The Put-Call Ratio (PCR) also increased to 1.39, which is near to the extreme bearish level. There are short covering In-The-Money (ITM) call options and long build-ups in Out-of-The-Money (OTM) were witnessed today. The highest Call OI was seen at 12000 strike and highest Put OI was seen at 11700 level. These levels are going to be critical for the monthly expiry. The next level of high OI for the calls and puts are at 11800 strike. With the high PCR, Nifty may face resistance at each higher level. The increased OI and high PCR may lead to volatile days ahead. The current derivatives data shows that the max pain is at 11800 level.
STOCK STRATEGY
HEXAWARE TECHNOLOGIES .................... BUY .................. CMP Rs. 379.85
BSE Code ..532129
Target 1 .... Rs.405
Target 2 .... Rs.428
Stoploss ....... Rs.355(CLS)
✓ Current Observation: After correcting almost 43 per cent from the lifetime highs, it retraced more than 38.2 per cent. It is making higher highs and higher lows and has broken out of an ascending triangle.
✓ Currently, the stock is trading above all the crucial moving averages, i.e. 50, 100 and 200 DMA.
✓ The RSI has broken out of the bullish symmetrical triangle and the volumes are picking up since last three days.
✓ The MACD line is above the signal line for the last three days, indicating that the momentum on the upside is picking up. The ADX is also showing improvement and the +DI is much above the -DI. This indicates the strength in the trend.
✓ Buy this stock at Rs. 379.85, with a stop loss of Rs. 355. The targets are open towards Rs 405 and Rs 428
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Bata India at Rs 1437.50 in issue no. 34 (dated June 17, 2019). Post our recommendation, the stock did not sustain at higher levels as selling pressured emerged in the market and the stock slipped below the stop loss level. We recommend our readers to exit with a loss at Rs 1395 on June 18, 2019.