Technicals Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : The roller-coaster ride continued on the eve of October F&O expiry. After opening the session with a gap-down, Nifty breached its October 15 mother bar’s low as well. It went on to test the support level as defined by the line of polarity (11,578-11,610) and bounced back sharply to enter into the positive terrain for a brief period. Thereafter, it witnessed wild swings. Despite all these, the range of the day i.e. the difference between the high and the low was capped to 138 points, which is much below the 10-day average. HDFC duos were the main architect of the fall, as both lost over 1.5 per cent. Nifty gained nearly 8 per cent in the October series and during this period, it recorded one of the best winning streaks of the year that lasted for 10 days. Thereafter, the level of 12,000-12,040 proved to be a sturdy wall of resistance as even after multiple attempts, the bulls were not able to cross this hurdle. Hence, now, Nifty is trading below the 20-DMA, which was breached with a bearish engulfing pattern.

However, a bearish engulfing pattern requires confirmation but the candlestick formation did not give a conclusive one despite having closed lower than its prior bar. After having a lower high and a lower low, the candlestick has got a green body as its close is greater than the opening. On the lower timeframe i.e. 60-mins, the index has managed to close inside the channel after breaching its lower end. Currently, Nifty is trading 1 per cent and 9 per cent above its 50-DMA and 200-DMA, respectively. India VIX is a key factor to monitor now (since a lot of uncertainty is in the air related to a new set of measures to curb COVID-19 cases in the European region as well as the US Presidential Election). It has increased to 24 from a low of nearly 17 at the beginning of October month. Sustaining above the mark of 24 would result in the breakout of the neckline of double bottom pattern and multi-weeks range.



 

Overall, the immediate support zone for the index is placed in the region of 11,540-11,610 as its confluence of the line of polarity and 50-DMA. A decisive breach of this support region would mean that we are heading lower towards the level of 11,407, which is a 50 per cent retracement level of the recent rally, followed by 11,262 levels. On the upside, if bulls reclaim its 20-DMA, they would start to regroup and might head towards the levels of 11,900 in the near term.

NIFTY DERIVATIVES : Nifty Futures has gained 835.80 points or 7.71 per cent in the October monthly series. For the next weekly expiry, the open interest wise put-call ratio (PCR) is at 0.93. For the November monthly series, PCR is at 1.70.

For the next weekly expiry, the highest call open interest is at 12,500 strikes with 12,36,450 OI. On the put side, 11,600 strikes have 11,34,750 open interest, which is the highest. The highest addition in the open interest was seen at 11,700 calls of the next weekly expiry with 7,90,725 OI and on the put side, 10,500 put has seen the highest addition in open interest with 6,27,975 OI. For the next weekly expiry, the total call open interest is 1,20,17,175 and the put open interest is 1,11,61,425.

For November monthly series, the highest call open interest is at 12,000 strikes with 14,48,550 OI, followed by 12,500 strikes with 13,16,550 OI. On the put side, the highest put open interest is at 11,000 strikes with 22,14,900 OI. The current derivative data suggest that the Max Pain is at 11,800 for the monthly expiry.

TECHNICAL RECOMMENDATION 

STOCK STRATEGY    

ADANI ENTERPRISES LTD ....... BUY ...... CMP :  Rs 329.85

BSE Code :512599  
Target 1 : Rs350  
Target 2 : Rs 355
Stoploss : Rs 310

✓ Current Observation: Adani Enterprises Limited is a holding company. The company is an integrated infrastructure company with businesses spanning coal trading, coal mining, oil & gas exploration, ports, multi-modal logistics, power generation as well as transmission & gas distribution.
✓ After registering the high of Rs 335.60 as of October 07, 2020, the stock has witnessed a minor correction. The correction is halted near the 38.2 per cent retracement level of its prior upward move (Rs 257.50-Rs 335.60) and coincides with the 20-day EMA level.
✓ Considering the daily timeframe, the stock has given a downward sloping trendline breakout along with a relatively higher volume. Further, the stock has formed a sizeable bullish candle on the breakout day, which adds strength to the breakout.
✓ As the stock is near its all-time high, it is trading above all the short and long-term moving averages. The stock is meeting the criteria of Mark Minervini’s trend template.
✓ Talking about the indicators, the stock's relative strength index (RSI) is in the bullish territory on both, the weekly and the daily timeframe. Further, the ADX is reasonably good at 27.02 levels. The +DI is above the -DI and the ADX show further strength in the trend.z
✓ Considering the above factors, we expect the stock to test the levels of Rs 350, followed by Rs 355 in the medium-term. One can place a stop-loss of Rs 310 for the long position. 

REVIEW OF STOCK STRATEGY 

We had recommended our readers to buy the stock of Navin Fluorine International Ltd at Rs 2,141.90 in issue no. 01 (dated October 26, 2020). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of around Rs 2,300. We had given a ‘book profit’ message at the level of Rs 2,236.75 through our SMS service on October 29, 2020. Thus, investors, who had taken positions, according to this strategy, would have made a decent profit.