Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : After a mammoth historical surge during the week, Nifty is seen consolidating for the past three days. Nifty had gained 875 points from last Thursday close in just two days (Friday and Monday). Later on, it was seen hovering around the gap area of Monday. After retracing 23.6 per cent of the two days’ big up move, the 50-share index is trying to consolidate around 23.6 retracement level. On a weekly chart, it is forming a long-legged Doji candle as it is almost closed at the Monday opening level. As we mentioned earlier, the breakout above 11181-200 zone will lead to a sharp move. In fact, the move is at an unexpected level. Currently, Nifty is oscillating around the 61.8 per cent retracement level (11543) of 3rd June - 23rd August fall. We had mentioned about these target level in our previous editions. Now, the Nifty will try to fill the Monday gap area by testing the 11381 levels. We need to watch the market behaviour to get a clear picture on the future price action. As of now, there is no weakness visible in any time frame. If in any case Nifty closes above 11600 level, then we can get fresh long opportunities in the market. At the same time, if it falls below the 11300 level, there is a higher probability of the index testing the breakout level area of 11181-200 zone. For the next 2-3 days, 11600-11300 levels will be critical resistance and support levels respectively. As some of the oscillators reached an overbought condition, there are chances of some more profit. However, try to remain cautious on either side as volatility is higher. Follow the strict money and risk management rules to sail safely at current volatile levels. 

NIFTY DERIVATIVES: Nifty gained 860 points or 8.35 per cent since last weekly expiry, while, in the September series, Nifty rose by 627.30 points or 5.73 per cent. This is one of the biggest gains in the history of the Indian derivatives market. The rollovers are seen at three months high at 62.38 per cent. The open interest wise Put-Call Ratio (PCR) is at 1.10 for the 3rd October weekly series. The open interest is highest at 11600 Call strike with 1068075. At the same time, out of the money strikes, 11900 and 11700 strikes have the highest open interest with 972150 and 970200, respectively. On the Put side, 11500 strike has 1072200 open interest. 11200 and 11000 strikes have the highest put open interest with 894900 and 764625, respectively. The total put interest is 7986825 and the total Call interest is 7274475. From 11000 to 12000 strike Calls have seen long buildup. On the Put side, these strikes witnessed the shorts build up. The current open interest data suggest that the max pain is placed at 11500 for next week expiry. 

STOCK STRATEGY RELIANCE INDUSTRIES ...................... BUY ...................... CMP Rs1296.60
BSE Code ...... 500325
Target 1 .... Rs1347
Target 2 .... Rs1417
Stoploss .... Rs1255(CLS) 

✓ Current Observation: Reliance Industries is looking attractive on a weekly chart, as after hovering around the 40-DMA the stock is attempting to make a higher high. There are parallel highs at Rs. 1300 zone. It is just less than a per cent away from the resistance area.
✓ The stock has broken out of the downward channel and is trading near the prior swing high. With this, it is trying to re-enter into the long uptrend channel. ✓ Currently, the stock is trading above all the moving averages and all of them are trending up.
✓ On a weekly chart, the leading indicator RSI has broken out of an inverted head and shoulder pattern and the volumes are increasing for the past two weeks. Moreover, the MACD line is about to cross over the signal on the zero line. Its relative price strength has also reached to 77 levels with an upward moment in the stock.
✓ Now, if the price is able to take out the parallel resistance area of Rs. 1300, then the stock can march towards its previous lifetime high.
✓ Buy this stock at at Rs. 1296.60 with a stop loss of Rs. 1255. The initial target is placed at Rs. 1347. If this target is achieved, continue the position with a trailing stop loss for the target of Rs. 1417 and above. 

REVIEW OF STOCK STRATEGY We had recommended our readers to buy the stock ICICI Prudential Life Insurance Ltd at Rs. 430.50 in issue no. 48 (dated September 23, 2019). Post our recommendation, the stock moved higher in line with our expectations and went on to touch the level of around Rs. 454.30. We had given a ‘Book Profit’ message at the level of Rs. 444 through our SMS service on September 26, 2019. Thus, investors who had taken positions according to this strategy would have made decent profit.