Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :After showing a consolidation movement with minor weakness in the last couple of trad-ing sessions, Nifty ended Thursday’s session with modest gains of 0.44 per cent at 15,173 levels.
The broader markets also ended in green with Nifty Mid-cap adding 0.18 per cent while Nifty Small-cap outperforming as it jumped 1.81 per cent. India VIX dropped 3.78 per cent to the 23.05 mark. Amongst the sectoral indices, Nifty Metal, Nifty FMCG & Nifty IT emerged as the top gainers while on the flipside, Nifty PSU Bank and Nifty Auto were the top losers.
The price action of the day formed a bullish candle, carrying higher high & higher low as compared to its prior bar. Technically, the forma-tion of a bullish pattern after a re-test of 5-EMA and filling February 8 gap area could indicate the completion of a minor downward correction, which was seen on February 9-10 and Nifty is signalling that it’s ready for the next leg of upmove. Having said, it would be perti-nent to watch out whether the bulls witness a follow-through move or not because tomorrow, being the last day of the week (Friday), traders usually prefer to go light over the weekend.
Going ahead, Wednesday’s session low of 14,977 is likely to act as an immediate support level and in the coming trade session, if Nifty slips below 14,977, then the likelihood of weakness extend-ing towards 14,860 levels shall remain higher. On the upside, a decisive break above the level of 15,250 would strengthen the bulls and in that case, Nifty would attempt to touch the levels of 15,450 in the near term.
On the lower timeframe i.e. hourly, the index is witnessing Bollinger Band Squeeze pattern as the bands are seen contracting. Usually, this phase is followed by periods of high volatility. So, it’s important to keep a close watch on the levels of 14,977 on the downside and 15,250 levels on the upside. A break on either side would lead to a trending move in the index.
NIFTY DERIVATIVES: Nifty Futures has gained 300.15 points or 2.01 per cent since the last weekly expiry. For the next weekly expiry, the open interest wise put-call ratio (PCR) of Nifty is at 1.09. For February monthly series, PCR is at 1.52.
For the next weekly expiry, the highest call open interest is at 15,500 strikes with 15,85,500 OI, followed by 15,200 strikes with 14,93,475 OI. On the put side, 14,000 strikes have 16,42,275 open interest, which is the highest. Today, the highest addition in the open interest was seen at 16,000 calls of the next weekly expiry with 10,12,650 OI while on the put side, 14,000 puts have seen the highest addition in the open interest with 11,63,250 OI.
For the next weekly expiry, the total call open interest is 1,53,05,625 and the put open interest is 1,67,25,525. For February monthly series, the highest call open interest is at 16,000 strikes with 19,72,575 OI, followed by 15,500 strikes with 19,13,400 OI. On the put side, the highest put open interest is at 14,000 strikes with 30,40,950 OI. The current derivative data suggest that the Max Pain is at 14,700 for the monthly expiry.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
JSW ENERGY LTD .......... BUY ............ CMP Rs 77.45
BSE Code : 533148
Target 1 : Rs 82.50
Target 2 : Rs 85
Stoploss :Rs 71(CLS)
✓Current Observation: JSW Energy Limited is amongst India’s leading private sector power producing company. The company is an integrated power company, primarily engaged in the generation and sale of power. Its business segments include power generation, power transmission, mining, power trading, and equipment manufacturing.
✓Technically, the stock is trading in an ascending channel since October 2020. Recently, the stock has bounced from the support trendline, which is also called the demand line, formed by connecting consecutive higher lows. At the same time, it coincides with the 34-day EMA level. The reversal from the support zone is justified by a strong volume.
✓As the stock is near its 52-week 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. It is trading above the 40, 30 & 10 weekly averages and all of them are trending up. At the same time, they are in the desired sequence.
✓ From the momentum indicators' perspective, the daily RSI is in a bullish trajectory and it is in a rising mode. The weekly RSI is also trading above the 60 mark for the last 11 weeks. The average directional index (ADX), which shows the strength of the trend, is as high as 26.03 on a daily chart and 51.19 on a weekly chart. Generally, levels above 25 levels are considered as a strong trend. In both the timeframes, the stock is meeting the criteria.
✓Considering the above factors, we recommend buying this stock with a stop-loss of Rs 71 on a closing basis for a target of Rs 82.50-Rs 85 in the short to medium-term.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Manappuram Finance Ltd at Rs 181.55 in issue no. 16 (dated February 08, 2021). Post our recommendation, the stock witnessed a consolidation along with low volume. The stock is still trading above its short and long-term moving averages while other technical parameters of the stock also look prom-ising. Hence, we would advise our readers to hold this stock with a stop-loss of Rs 169 on a closing basis as the stock is likely to move higher from the current levels.