Technicals Analysis

SPOT NIFTY :
The robust performance showcased by HDFC twins helped Nifty in recording a new high on Thursday. Nifty ended the session up by 0.48 per cent after achieving a new milestone of closing above the 13,700 mark for the first time ever in history. The contribution by HDFC twins was almost 60 points in the index. The advance-decline ratio for Nifty 50 was in the favour of the decliners since 34 stocks ended in the red as compared to 16 stocks, which ended in the green.

The broader markets too lost their fizz as they underperformed the frontline indices with Nifty Mid-cap closing down by 0.27 per cent, while Nifty Small-cap added gains of a meagre 0.15 per cent. As a result, the overall advance-decline ratio went in the favour of the decliners.             

No prizes for guessing! Nifty formed yet another indecisive candlestick pattern on the daily chart today. It’s more or less like hitting 6 sixes in 6 balls as for the sixth day in a row, Nifty has formed this pattern.
         
The price action formed a small-bodied bullish candle with a minor upper & lower shadow. This pattern resembles a high wave or a spinning top candle. Technically, the formation of this pattern after a strong uptrend is considered as a reversal pattern but as we know for a fact, none of these indecisive patterns has got any kind of confirmation. In the near term, the zone of 13,800- 13,840 would act as immediate resistance and on the downside, the gap area of Wednesday is likely to provide immediate support to the bulls. Hence, as long as the bulls maintained their head above the level of 13,580-13,600, adopt a buy-on-dips strategy.
             
There are high chances that we would once again enter into a phase of consolidation after hitting the targets of 13,800-13,840. For, reversal trade, we advise the traders to wait until Nifty closes below the prior bar low and breaches its 5-EMA on a closing basis. Till then, be with a positive bias. Meanwhile, buying on dips can be preferred.

NIFTY DERIVATIVES: Nifty Futures has gained 225.20 points or 1.66 per cent since the last weekly expiry. On Thursday, Bank Nifty open interest surged by 10.74 per cent and Nifty open interest was also up by 4.09 per cent. For the next week, the put-call ratio (PCR) is at 1.24 and  for the December monthly series, the PCR is much higher at 1.91. This kind of higher PCR has not been recorded in recent times. For the next weekly expiry, the highest call open interest is at 14,000 strikes with 24,16,500 OI, followed by 14,500 strikes with 13,30,350 OI. On the put side, 13,500 strikes have 16,39,875 open interest, which is the highest. Today, the highest addition in the open interest was seen at 14,000 calls of the next weekly expiry with 11,46,225 OI and on the put side, 13,700 puts have seen the highest addition in the open interest with 12,03,375 OI. For the next weekly expiry, the total call open interest is 1,42,63,650 and the put open interest is 1,77,40,050.
           
 For the December monthly series, the highest call open interest is at 13,000 strikes with 22,97,475 OI, followed by 13,500 strikes with 19,54,725 OI. On the put side, the highest put open interest is at 13,000 strikes with 45,64,725 OI. The current derivative data suggest that the Max Pain is at 13,500 for the monthly expiry.

TECHNICAL RECOMMENDATION 

STOCK STRATEGY 

GHCL LTD............. BUY .......... CMP Rs 202​

BSE Code : 500171
Target 1: Rs 220
Target 2 : Rs 225​
Stoploss : Rs 190 (CLS)

✓ Current Observation: GHCL Limited is engaged in the business of manufacturing and trading inorganic chemicals, home textiles & wind power generation. In chemicals, the company manufactures soda ash (Anhydrous Sodium Carbonate) that is used as a raw material for detergents and glass industries along with Sodium Bicarbonate (baking soda).
✓ Technically, the stock has given a horizontal trendline breakout as of December 01, 2020, and thereafter, witnessed nearly 20 per cent upside in just four trading sessions. However, after registering a high of Rs 214.40, 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 158.30-Rs 214.40) and coincides with the 8-day EMA level.
✓Currently, all the moving averages based trade set-ups are showing a bullish strength in the stock. Daryl Guppy’s multiple moving averages is also suggesting a bullish strength in the stock.
✓ The 14-period RSI on the daily timeframe is in bullish territory. Interestingly, in the recent correction, the RSI has bounced from the zone of 62-63 mark, which indicates that the stock is in a super bullish range as per the RSI range shift rules. Moreover, the trend strength indicator i.e. the average directional index (ADX) is above 50 on the daily chart, which indicates further strength.
✓These technical pieces of evidence indicate a strong upside in the coming days. Traders can buy the stock with a stop-loss of Rs 190 level. The initial target is placed at a prior high of Rs 220 but above this level, it can test Rs 225 level.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Seamec Ltd at Rs 474.80 in issue no. 08 (dated December 14, 2020). Post our recommendation, the stock moved higher in line with our expectations and went on to touch the level of around Rs 512.25. We had given a ‘book profit’ message at the level of Rs 509.65 via our SMS service on December 14, 2020. Thus, investors, who had taken positions, according to this strategy, would have made a decent profit