Technicals
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty continued the fall for the sixth day and lost 589 points since July expiry. Nifty has broken the critical level of 11300 with volumes higher than the last two days. This demonstrates distribution. FIIs sold more than Rs. 12000 crore worth of shares in the month of July. The market breadth has worsened again. At the record level, about 319 stocks hit 52-week lows today. Most of the stocks are at two-year lows. A handful of stocks showed some strength, but the question remains about the stability. Let us observe some technical parameters, which are scary at this point in time. The upward channel formed from October 2018 low has decisively broken on the downside. Nifty closed below the 38.2 per cent retracement of this entire channel. The volumes are the biggest worry now. Selling volumes are more than the buying volumes. The large-caps are falling like knives. The scrips that protected the indices till recent times are collapsing now. But, on the positive side, the RSI is near the oversold condition. The 200-DMA is just another 120 points away. The length of the fall from July 5 to July 9 is 520 points. After a counter consolidation pattern (flag), the fall from July 17 is now 490 points. The general rule is that it should meet the flag pole length as the target, which means we are just a few points away. The most important factor is the derivatives data. The Put-Call Ratio is now at 0.77. The above factors are indicating that the fall is limited from now. The volatility may increase. It should hold the 200-DMA to take rest or to cover shorts built in the market. The final important observation is that Wednesday’s low is protected on a volatile day. For, at least now, 11100-11160 zone is critical for the market. From this level, it may once again bounce at least 300-400 points to the level of 11500 and above. This could be the last chance to exit profitable portfolio positions. At the same time, this is not a time to go long. The way the distribution is happening is not good for the market. The Midcap-100 and Small-cap indices have broken the critical supports. This market is not for the weak hearts, in the near term.
NIFTY DERIVATIVES: Nifty July contract lost 353.35 points or 3.04 per cent since last weekly expiry. The fall is similar to the July 5-10 decline in terms of sharpness. More distribution is happening for the last five sessions in comparison to the previous fall. This is the biggest worry now. It resembles the capitulation in the market. As 200-DMA is very near, the fall may be limited now. The Put-Call Ratio (PCR) is at 0.77, so the bottom is almost done. Generally, if the PCR value is near 0.50-0.70, it is considered the market is at the low point of the swing. The Open Interest (OI) rose by 7.95 per cent. For the August 1st weekly series, the PCR is just 0.65, which means the chances of bounce is higher. The highest Call OI is at 11400 strike with 1,465,650 OI. The next level of high OI is at 11500 strike. On the Put side, the maximum OI is at 11200 strike with 996,675 and at 11250 strike with 627825. But for the August monthly series, PCR is at 1.43, which is a bearish sign. Even though the market may bounce in the short term, the monthly signs are still highly bearish. The highest Put OI for August monthly series is at 11000 level with 2820225 OI. Huge call writing happened from 11250 to 11800 strikes. At the same time, on the Put side, up to 12000 strike shorts were build up. For the next week, the max pain is at 11300.
STOCK STRATEGY BERGER PAINTS (INDIA) LTD. .................. BUY ..................... CMP Rs327
BSE Code ...... 509480 Target 1 .... Rs355 Target 2 .... Rs375 Stoploss ....... Rs303 (CLS)
✓ Current Observation: Berger Paints closed above the prior high within the very long bullish symmetrical triangle. It also closed above the long and short moving averages. The price not formed any lower low for the last ten years and clearly in an uptrend.
✓ For the past 47 week, it is consolidation in a triangle shape any breakout this triangle is a good entry point for the stock.
✓ The MACD line is above the signal line for the past two days. The RSI is also giving a positive signal as it has broken out of bullish symmetrical triangle. Above 50-week average volumes recorded even on a weekly basis.
✓ Buy this stock at Rs. 327 with a stop loss of Rs. 303 for the target of Rs. 355 and above its target is Rs. 375. REVIEW OF STOCK STRATEGY We had recommended our readers to buy the stock of Housing Development Finance Corp. Ltd at Rs 2338 in issue no. 39 (dated July 22, 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 2186.60 on July 22, 2019.
