Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : After two days of a huge fall, Nifty tried to consolidate within the gap area of May 20. Even though Nifty gained 0. 69 per cent, it is still below the May 20 low. In the days of consolidation, it is unable to cross the 23.6 per cent retracement level. As 90 per cent of the gap is filled, it has reached the upward channel's support line. The fall from here is limited as long as 11460 is protected. For the next week, a close above 11584 can lead to a move above the 11660 level. Nifty is still below all the short and medium-term moving averages. The nearest moving average 5-EMA is placed at 11614 and 8-EMA at 11663. The 20-DMA is far away at 11738 and the Bollinger Bands are still falling down. Some of the indicators are trying to come out of the oversold condition. The Thursday positive close came after four days of negative bias because of weekly expiry and short covering in the frontline stocks. There is a need to have follow-up action on Friday too. The existing structure of the market is not in a good shape. On a weekly basis, in case the Nifty closes below 11,447 (11,426 spot), it will create a huge sell-off in the market. Nifty may consolidate between 11426-11750 for few more days before taking direction. Be cautious and avoid taking aggressive long positions.



NIFTY DERIVATIVES: Nifty futures lost 399.75 points or 3.34 per cent since last weekly expiry. The general budget last Friday triggered huge sell-off in the market. Some of the most favoured stocks also fell sharply because of certain budget proposals. The Open Interest (OI) on Thursday was just flat to negative at -0.6 per cent. The OI is almost flat for the last three days. Due to some short covering visible on the weekly expiry day, the market bounced from the support level. In Bank Nifty also, the OI declined by 0.71 per cent on a positive closing day, indicating short covering. The volume-wise Put-Call ratio is at 1.03 at the neutral zone. The highest OI on the call side is seen at 11700 strike with 11,02,875 and the next highest OI is at 11600 strike with 10,56,600. On the Put side, 11500 strike witnessed the highest OI of 11,67,150. The option chain suggests that from 11750 to 12300 strikes on the Call side, the shorts were build up. On the Put side, 11100-12000 strikes witnessed shorts build up. Interestingly, the Call (all strikes) OI is higher at 56,81,150 than the Put OI at 48,61,800. This means the OI-wise PCR for the next weekly expiry is 0.86, which indicates some more positiveness in the market. With the current derivative data, the max pain for the next weekly expiry is at 11600 level.  




STOCK STRATEGY

PVR LTD. .................................. BUY ............................ CMP Rs.1730.45 

BSE Code .....532689
Target 1 .... Rs.1810
Target 2 .... Rs.1830
Stoploss ....... Rs.1680 (CLS) 



✓ Current Observation:Technically, the stock moved above the 50-DMA and the prior swing high. The stock also has also broken out of the downward sloping trendline and out of the downward channel. Interestingly, the stock moved above the 61.8 per cent retracement of the prior downswing.
✓ The RSI also moved above the prior swing and above 55 region. The MACD histogram increasing for the last four days shows that the momentum on the upside is increasing.
✓ It posted a decent earnings in the March quarter with over 45 per cent growth in sales and 78 per cent EPS growth. The institutional holding increased by 0.48 per cent and the number of funds invested in this company rose to 216 in the March quarter. With 15 per cent return on equity (ROE), it looks attractive.
✓ Buy this stock at Rs. 1730.45 with a stop loss of Rs. 1680. The target is placed at Rs. 1810, followed by Rs. 1830. 


REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Multi Commodity Exchange (MCX) at Rs 861.20 in issue no. 37 (dated July 8, 2019). Post our recommendation, the stock did not sustain at higher levels as selling pressure emerged in the market and the stock slipped below the stop loss level. We recommended our readers to exit with a loss. We exited the stock at Rs 817 on July 8, 2019.