Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : As we are cautioning for the last few weeks, the Nifty breached its May 2019 low and confirmed the bearish trend. The benchmark index closed below the upward channel support. The continuous selling from the FIIs and the overall distribution in the market forced Nifty to fall without any relief. It also retraced more than 50 per cent of Oct 2018-June 2019 rally in just 40 trading sessions. It fell 1159 points or 9.56 per cent from the top. Generally, any 10 per cent correction from the top is called a bear market condition. The next level support is placed at 61.8 per cent retracement of Oct-June rally, 11806. The sharp bounce of 100 points from the lows of the day attracted large volumes. This is an indication that further downside is restricted. The hammer pattern at the bottom with higher volumes also indicates that the fall may not extend further. It is better to be cautious about taking fresh short positions in the market. At the same time, it is advisable to wait till the Nifty moves above the 11188 level to get confirmation of the short-term strength. In the current pessimistic environment, only good money management practices will protect the capital.



NIFTY DERIVATIVES: The Nifty futures lost 220 points or 1.96 per cent since last expiry. Two marginal positive days on Friday and Wednesday have not given any confidence to the bulls. The sharp rebound from the low is an indication of massive short-covering in the market. Nifty recovered 100 points in just 15 minutes. Even after this sharp recovery, Nifty closed below the previous day low. The open interest (OI) rose by 13.13 per cent on an extremely volatile day. The OI-wise Put-Call ratio for the August 8 weekly expiry is at 0.62 per cent. The lowest PCR also indicates that the fall is limited from now. The rollovers in the first of the month are at 4.34 per cent. The highest Call OI is at 11000 strike with 4,112,775. The next level of high OI is at 11100 strike with 3,589,725. On the Put side, 10900 strike has the highest OI with 2172900. The 10950 strike has OI of 1015275. In all, most of the strike Call writing was witnessed. On the Put side, longs were build-up in all strikes. For the next week, the max pain is around 11000. 


STOCK STRATEGY

VOLTAS ..................................... BUY ................................ CMP Rs.608.45 

BSE Code ...... 500575 Target 1 .... Rs.650 | Target 2 .... Rs.660 | Stoploss ....... Rs.575 (CLS) 



✓Current Observation: Technically, the stock is moving in an upward channel. After taking channel support at Rs. 557, the stock bounced strongly and crossed the 38.2 per cent of recent downswing within the channel. The massive volumes on Thursday indicate that accumulation is in full swing. The institutional holding increased to 49.29 in June quarter, which confirms accumulation in the stock.
✓ The RSI is above the 50 zone and out of the squeeze. The MACD line crossed the signal line, which indicates that the positive momentum is building up in the stock.
✓ The stock also moved above the 50-DMA with higher volumes.
✓ Buy this stock at Rs. 608.45 with a stop loss of Rs. 575. The initial target is placed at Rs. 650, followed by Rs 660. 

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock Berger Paints (India) Ltd at Rs 327 in issue no. 40 (dated July 29, 2019). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of around Rs 340.90. We had given a ‘Book Profit’ message at the level of Rs 339.65 through our SMS service on July 30, 2019. Thus, investors who had taken positions according to this strategy would have made decent profit.