Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : Last week, Nifty experienced high volatility. The GDP figures dampened the sentiments and the Finance Minister's announcement did not improve the sentiments. After witnessing a 296- point volatility in just four trading sessions, Nifty lost 100.40 points or 0.92 per cent during the week. The 100 points bounce from the lower levels on Wednesday did not sustain for the second day. On the weekly expiry day, a small body negative candle was formed with upper and lower shadows. Moreover, the Nifty is trading below all the short term moving averages and it mostly traded within the last week’s range. No indicator is showing a positive signal now. As the market is moving in a zone since last month, the Bollinger Bands are narrowing further, indicating a big move. The price is still below the 20-DMA and the probable move is towards the downside. The leading indicator is unable to make any significant higher high and the 40-38 zone is going to be critical for the market. Every rise in the market is attracting a fresh sell-off. As long as 20-DMA (10959) is not breached, better maintain a bearish bias. Any close below the prior bar will lead to a sharp downside. Above 10,959, the target is intact at 11,181. The September month will be very tricky for the long traders.



NIFTY DERIVATIVES: Nifty futures lost 69.35 points since last weekly expiry and formed a gravestone doji. At the beginning of the week, i.e. on Tuesday, Nifty witnessed one of the biggest fall in its history by losing more than 220 points in a single day. Though it is trading in a range since last one month, it is unable to make a higher high with a conviction. Traders are using every rise as a shorting opportunity. On a flat to negative day, the Open Interest rose by 5.66 per cent. The Put-Call Ratio (PCR) is at 0.86. For the September series, the PCR is at 1.15. Next week the maximum Call open interest was seen at 11000 and 10900 strikes with 1581375 and 1428225 OI. Even 11200 strike also witnessed a 1191225 OI. On a PUT side, the 10800 strike has 1206750 Open interest and 10900 strke has 1206750 OI. From 10900 to 11500 strikes, there is a huge call writing happened and interestingly there is long built up seen in Calls. On the Put side, longs are witnessing from 11200- 10800 strikes. In the first week of this month, the rollovers were seen at 4.37 per cent. As per the current derivative data the Max pain is at 11000 levels for next week.



STOCK STRATEGY

DR. REDDY'S LABORATORIES .................... BUY ................ CMP Rs.2681.45

BSE Code ...... 500124 Target 1 ....Rs.2810 | Target 2 ....Rs.2862 | Stoploss ....Rs.2585(CLS) 



✓ Current Observation: India’s leading drug maker Dr. Reddy’s has broken out of long consolidation and closed above the 200-DMA and 50-DMA.

✓ Technically, the stock came out of 24 trading sessions tight range and closed above the 200-DMA. The stock is trading in the rage of Rs 2480-2680 for the past three-and-half months. The volumes picked up in the last two days and there are enough signs indicating accumulation.

✓ The RSI is above the prior high and making higher highs for the past three months. The MACD line has just reached above the zero line and the histogram suggests that the momentum is picking up on the bullish side.

✓ The directional indicator ADX is also suggesting strength in the stock. In case the price moves above Rs. 2680, a three-andhalf month consolidation breakout will happen. Its Relative Price Strength (RS) also improved to 77.

✓ Buy this stock at Rs 2681.45 with a stop loss of Rs 2585. The initial target is open towards Rs. 2810. Above this level, continue your position for the target of Rs. 2862.


REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of United Spirits at Rs 616 in issue no. 45 (dated September 2, 2019). Post our recommendation, the stock has been witnessing consolidation along with low volumes. The stock is still trading above the short and long term moving averages. The technical parameters of the stock still look promising. We would advise our readers to hold this stock with a stop loss of Rs 580, as the stock is likely to move higher from the current levels.