Technicals
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty has gained just about 3 points in the last three trading sessions and it formed an inside bar and Doji bar on Wednesday as Nifty moved in a counter-trend consolidation pattern since August 6 and forming flag pattern. As the volumes are also decreasing, which is one of the pattern characters, the current counter-trend is definitive for the short term only. After facing resistance at 200-DMA, it fell sharply on Tuesday. Earlier, this kind of counter-trend consolidation was limited to 6 days. Now we are already on day 6 and for any confirmation for the prior trend, Nifty needs to close below the prior day low. In case Nifty closes below the Wednesday low of 10935, it would mean a flag breakdown. To continue the bullish strength, it needs a move above the 200-DMA as well as Friday’s high of 11181.45 decisively. As long as it trades between 11181.4510935, traders may not get clear trading opportunities. Wait till these levels break for clear trading opportunity. The RSI has not made any significant swing in this counter-trend.
NIFTY DERIVATIVES: After witnessing 277-point volatility in just 3 trading sessions, Nifty future ended with a loss of 52 points. It also formed an inside bar and Doji, and closed below the 8-EMA. It was unable to sustain at higher levels as profit-booking picked up at the end of the session. The Open Interest (OI) rose by 3.54 per cent. Interestingly, even though the Bank Nifty closed with 1 per cent gain, the OI fell by 3.10 per cent. The Put-Call Ratio (PCR) for the August 22 weekly series is at 0.80. For the August monthly series, the PCR is at 1.15. This indicates the market is in the neutral zone for the next week and in the bearish zone for the monthly series. The highest Call OI was seen at 11200 strike with 12595 lots and as many as 8040 lots of OI added on Wednesday. The 11100 Call strike has OI of 10642. On the Put side, 11000 and 10900 strikes have highest OI at 12951 and 12660, respectively. Shorts build-up for At the Money (ATM) Put strikes and longs were seen in Call ATM strikes. Most of the Out of the Money strikes have seen writing. With the current derivative data, the max pain for the next week is also at the 11000 level.
PIDILITE INDUSTRIES ...... BUY ....... CMP Rs.1,352
BSE Code ...... 500331
Target 1 .... Rs.1420
Target 2 .... Rs.1447
Stoploss ....... Rs1290
✓ Current Observation: Technically, the stock is trading at all-time highs. The stock has broken out of 18-week cup and handle pattern and trading above the pivot level. It is also trading above all the short and long term moving averages. Last week, the stock recorded the highest volumes after June 2018.
✓ Its relative price strength is as high as 92, which means it is performing better than 92 per cent of the listed stocks.
✓ The RSI is in the bullish zone and all other indicators are also suggesting bullish strength in the stock. The MACD line is above the signal line for the past two weeks.
✓ The company has posted consistent 10 per cent growth in sales for the two years. With 22 per cent return on equity and meeting every CANSLIM characteristics, the stock looks attractive fundamentally at a current level.
✓ Buy this stock at Rs 1352 with a stop loss of Rs. 1290. The targets are open towards Rs.1420 and Rs. 1447.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Marico Ltd at Rs 383.10 in issue no. 42 (dated August 12, 2019). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of around Rs 395.50. We had given a ‘Book Profit’ message at the level of Rs 393.05 through our SMS service on August 13, 2019. Thus, investors who had taken positions according to this strategy would have made decent profit.