Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : The bulls logged gains for the fourth consecutive session on Thursday, after surpassing and comfortably closing above the previous hurdle, which was placed at the 12,025 mark. Barring Nifty Realty, all other sectoral indices ended in green wherein, Nifty Metal, Nifty Media, and Nifty PSU Bank emerged as the top gainers. Further, the market breadth was significantly in the favour of advancers as 1,347 stocks advanced while 491 stocks declined. India VIX crashed nearly 10 per cent and settled at 20.97.
On Thursday, Nifty formed a bullish candle with a gap-up opening and the opening gap remained unfilled. Technically, this could be considered as a bullish breakaway gap as the index was trading in a broad range since mid-October and resisted multiple times around the zone of 12,000-12,025. However, on Thursday, it broke out of the broad range with a gap-up. So, this is a positive sign for the index, which indicates that the bulls are in a commanding position.
Interestingly, the RSI has broken out of a channel and entered into bullish territory. Furthermore, the RSI is quoting at the 65 mark and it’s not yet in the overbought territory despite the fact that the index witnessed an upmove of 5 per cent from the low of October 30. Besides, the MACD has given a positive crossover.
Nonetheless, the level of 12,000-12,025 would act as an important support for the index in the near-term as per the rule of change in polarity i.e. previous resistance once breached acts as a support level. On the upside, targets are open towards the levels of 12,220, followed by an all-time high level. As long as the index stays above the 12,00012,025 mark, be with a bullish bias.
NIFTY DERIVATIVES : Nifty Futures gained 484.10 points or 4.14 per cent since the last weekly expiry. For the next weekly expiry, the open interest wise put-call ratio (PCR) is at 1.24. For the November monthly series, PCR is at 1.59. For the next weekly expiry, the highest call open interest is at 13,000 strikes with 17,46,300 OI. On the put side, 12,000 strike has 17,75,625 open interest, which is the highest. The highest addition in open interest was seen at 13,000 calls of the next weekly expiry with 14,91,600 OI and on the put side, 12,000 put has seen the highest addition in the open interest with 17,31,375 OI. For the next weekly expiry, the total call open interest is 1,31,66,100 and the put open interest is 1,62,80,100. For November monthly series, the highest call open interest is at 12,000 strikes with 18,21,300 OI, followed by 13,000 strikes with 16,09,500 OI. On the put side, the highest put open interest is at 11,500 strikes with 26,73,975 OI. The current derivative data suggest that the Max Pain is at 11,900 for the monthly expiry.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
SUNDRAM ....... BUY ...... CMP : Rs 460.15
BSE Code : 500403
Target 1 : Rs493
Target 2 : Rs 510
Stoploss : Rs 430
✓ Current Observation: Sundram Fasteners Limited is a holding company, which is engaged in the manufacturing of high tensile fasteners and motor vehicle parts & accessories.
✓ The stock has jumped over 98 per cent from the low of Rs 248.50 to a high of Rs 491. However, it had formed a Doji candlestick pattern as on the weekend of August 28, 2020, and thereafter, witnessed a throwback. The throwback is halted near the 38.2 per cent retracement level of its prior upward move (Rs 248.50-Rs 491).
✓ Currently, the stock has formed a strong base around the levels of Rs 391-Rs 400 and initiated its northward journey.
✓ Further, all the moving averages-based trade set-ups are showing a bullish strength in the stock. Daryl Guppy’s multiple moving averages is suggesting a bullish strength in the stock.
✓ Talking about the indicators, the stock's relative strength index (RSI) on the weekly chart has surged above the 60 mark, which is a bullish sign. Martin Pring’s long-term KST set up has also given a positive crossover.
✓ The weekly ADX is reasonably good at 26.42 levels. The +DI is above the -DI and the ADX shows strength in the trend.
✓itial target is placed at a prior high of Rs 493 and above this level, it can test the level of Rs 510.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Adani Enterprises Ltd at Rs 329.85 in issue no. 02 (dated November 02, 2020). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of around Rs 359.50. We had given a ‘book profit’ message at the level of Rs 342.95 through our SMS service on October 30, 2020. Thus, investors, who had taken positions, according to this strategy, would have made a decent profit.