Technicals Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY :Nifty logged a hat-trick of losses on Thursday as it extended its southward journey for the third successive day. The index went down by 2.02 per cent from its all-time high, registered on Tuesday.

The index opened with gains today and it even attempted to move higher during the morning trading session but failed near about the opening level of the prior bar. Thereafter, the index went onto breach the level of 15,100 and in the end, it settled at 15,119 levels with a loss of 0.59 per cent.

Bucking the trend, the broader indices outperformed with Nifty Mid-cap and Small-cap adding 0.47 per cent and 0.96 per cent, respectively. Nifty Mid-cap and Small-cap indices have relatively outperformed the frontline indices in the last week. On the other hand, defensive sectors like Nifty IT, Nifty FMCG, and Nifty Pharma underperformed the frontline indices.

Nifty index registered a fresh 5-day low on Thursday and decisively closed below its 5-EMA. At the same time, the 5-EMA has also begun to trend down, which is not a healthy sign for the index. Further, on the lower timeframe i.e. 60-minutes, the index has breached its 20-hourly moving average and at the same time, the moving average is trending down, which are some of the alarming signs for the short-term trend.

At present, the index is trading up by 1.90 per cent from its 21-EMA. Going ahead, we expect the index to extend this breather phase as well as revert to its mean of 21-EMA. Reverting to mean should be viewed as a healthy sign as this would set the stage for the next leg of upmove towards 15,550 levels in the near term.

However, the stock-specific action would continue as we are seeing the broader markets outperforming the index and interestingly, Nifty Small-cap index has a lot to catch-up as it’s still trading nearly 19 per cent away from its all-time high level whereas, the majority of the key indices have logged fresh all-time highs. Hence, stock-selection would be crucial in the coming week andalong with this, the primary focus should be on position management.

NIFTY DERIVATIVES:
Nifty Futures has lost 66.10 points or 0.43 per cent since the last weekly expiry. On February 17, 2021, Nifty Futures witnessed a distribution day as the index fell more than 0.2 per cent from the previous day’s close along with a relatively higher volume. For February monthly series, the open interest wise put-call ratio (PCR) is at 1.08.

For February monthly expiry, the highest call open interest is at 16,000 strikes with 38,50,350 OI, followed by 15,500 strikes with 29,19,600 OI. On the put side, 14,000 strikes have 1,16,51,325 open interest, which is the highest. Today, the highest addition in the open interest was seen at 16,000 call of February monthly expiry with 14,97,825 OI while on the put side, 14,000 put have seen the highest addition of open interest with 11,73,900 OI. The total call open interest for February monthly series is 3,62,03,775 and the put open interest is 3,91,21,650. The current derivative data suggest that the Max Pain is at 15,000 for the monthly expiry.

TECHNICAL RECOMMENDATION

STOCK STRATEGY 

GHCL LTD .......... BUY ............ CMP Rs 216.50

BSE Code : 500171
Target 1 : Rs 228
Target 2 : Rs 235
Stoploss :Rs 205(CLS)

✓ Current Observation: GHCL Ltd ventures in the businesses of chemicals and textiles. The company manufactures soda ash (Anhydrous Sodium Carbonate), a major raw material for detergents, glass & ceramics industries as well as baking soda (Sodium Bicarbonate).
✓ Technically, the stock has formed a hammer candlestick pattern as on the weekend of March 27, 2020 and thereafter, maintained its rhythm of higher tops & higher bottoms.
✓ Currently, the stock bounced from the edge of upward sloping trendline support, which has been formed by connecting swing lows since December 2020. Further, the reversal from the support zone is justified by the above 50-day average volume.
✓ 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. Talking about the indicators, the stock's relative strength index (RSI) has reached its highest value in the last 14-days, which is bullish. Also, it has managed to close above the 60 mark after a span of almost three weeks. Further, for the last 11 weeks, the RSI is above the 60 mark on the weekly chart.
✓ The daily and weekly stochastic oscillators are also suggesting some bullish strength since per cent K is above the per cent D.
✓ Based on the above observations, we expect the stock to move higher from the current levels and test the levels of Rs 228, followed by Rs 235 in the short-term. The stop-loss can be maintained at Rs 205 level on a closing basis.

REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of JSW Energy Ltd at Rs 77.45 in issue no. 17 (dated February 15, 2021). Post our recommendation, the stock has been witnessing consolidation along with a low volume. The stock is still trading above its short and long-term moving averages while other technical parameters of the stock also look promising. We would advise our readers to hold this stock with a stop-loss of Rs 71 on a closing basis, as the stock is likely to move higher from the current levels.