Technicals Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : Nifty opened the session with a gap-up on Thursday and traded within the first hour range during the majority part of the day.

In the last leg of the trade, it registered an intraday high of 15,176.50 but failed to sustain at higher levels due to expiry day jitters while at the time of closing, it dipped almost 79 points from the day’s high. Despite shaving off almost 79 points from the day’s high, it managed to log gains of 0.77 per cent and closed just shy of the 15,100 mark.

The broader markets continued to witness healthy buy-ing interest as Nifty Midcap-100 and Smallcap-100 surged 1.53 per cent and 1.43 per cent, respectively. As a result, the advance-decline ratio was in the favour of advancers. India Volatility Index or VIX dropped about 5 per cent and slipped below the 23-mark. Amongst the sectoral indices, Nifty Metal jumped nearly 4 per cent, followed by Nifty Realty, which gained about 1.7 per cent. On the other hand, Nifty FMCG and Nifty Financial Services dropped marginally.

Nifty has moved almost 500 points from the lows of 14,651.85 to the high of 15,176.50. With this, it has retraced almost 61.8 per cent of the downfall from all-time highs. It has also moved above the 5-EMA and 21-EMA. Both the short-term moving averages have started to trend up. Moreover, they are in the desired sequence. Hence, this is a positive sign.

Technically, the index might have logged gains of 115 points on Thursday. However, the day’s range was confined within 111 points while the gains were largely due to the gap-up opening. Since Thursday’s trading range was the lowest in the last seven trading sessions, it led to the formation of the NR7 pattern. So, in the coming trading sessions, the high & low of Thursday’s session will be important to watch out for the traders. A sustainable move above the levels of 15,175-15,200 would open gates towards 15,320-15,340 levels. Meanwhile, a break below the level of 15,065 would give an advantage to the bears and they may try to re-test 21-EMA on the downside.

Along with the high & low of Thursday’s session, traders should also keep an eye on the performance of Bank Nifty, mainly because of two reasons: Firstly, Bank Nifty components carry almost 34 per cent weightage and the strong rally, which was witnessed in the markets, was powered by Bank Nifty. The level of 36,340 is a key level to watch on the downside for Bank Nifty. A breach of this support level could lead to some sideways action.

NIFTY DERIVATIVES:
Nifty Futures has gained 1,254.90 points or 9.06 per cent in February monthly series. In February series, Nifty Futures has witnessed four distribution days, as on these days, the index fell more than 0.2 per cent from the previous day’s close along with a relatively higher volume.

For the next weekly expiry, the open interest wise put-call ratio (PCR) of Nifty is at 0.88. For March monthly series, PCR is at 1.97. For the next weekly expiry, the highest call open interest is at 16,500 strikes with 14,17,725 OI, followed by 15,200 strikes with 12,50,175 OI. On the put side, 15,000 strikes have 11,64,975 open interest, which is the highest. Today, the highest addition in the open interest was seen at 16,500 calls of the next weekly expiry with 12,97,500 OI while on the put side, 15,000 puts have seen the highest addition in the open interest with 9,22,500 OI.

For the next weekly expiry, the total call open interest is 1,28,92,800 while the put open interest is 1,13,29,725. For March monthly series, the highest call open interest is at 16,000 strikes with 18,89,775 OI, followed by 16,500 strikes with 13,23,450 OI. On the put side, the highest put open interest is at 14,000 strikes with 29,78,175 OI. The current derivative data suggest that Max Pain is at 15,000 for the monthly expiry.

TECHNICAL RECOMMENDATION

STOCK STRATEGY 

CEAT LTD​ .......... BUY ............ CMP Rs 1,658.05

BSE Code : 500878
Target 1 : Rs 1,763
Target 2 : Rs 1,790
Stoploss :Rs 1,540(CLS)

✓Current Observation: CEAT Limited is engaged in the manufacturing and sale of automotive tires, tubes & flaps. The company manufactures radials for a range of vehicles. It offers products for light commercial vehicles (LCVs), motorcycles, scooters, cars, farm vehicles & trailers, off the road (OTR)/speciality vehicles & trucks, among others.
✓After registering the low of Rs 1,020 on December 22, 2020, the stock has witnessed a nearly 73 per cent upside in just 30 trading sessions. However, the stock has formed a shooting star candlestick pattern as of February 04, 2021, and thereafter witnessed a minor correction. During the corrective phase, the volume activity was mostly below the 50-day average volume. Hence, it should be viewed as a routine decline after a robust move.
✓The correction is halted near the 38.2 per cent retracement level of its prior upward move (Rs 1,020-Rs 1,763) and coincides with the 34-day EMA level. The stock has formed a spinning top like candlestick pattern and initiated its northward journey.
✓As the stock is trading above its short and long-term moving averages, it is meeting the criteria of Daryl Guppy’s multiple moving averages rules. Further, the positive crossover on the 14-period daily RSI and stochastic supports the overall bullish price structure. The daily ADX is very strong at 46.23. Moreover, the ADX and +DI are above the -DI, which indicates a positive strength in the stock.
✓These technical pieces of evidence indicate a strong upside in the coming days. Traders can buy the stock with a stop-loss of Rs 1,540 level. The initial target is placed at a prior high of Rs 1,763. If it moves above this level, it can test the level of Rs 1,790.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of GHCL Ltd at Rs 216.50 in issue no. 18 (dated February 22, 2021). Post our recommendation, the stock has been wit-nessing consolidation along with a low volume. Currently, it is hovering around the horizontal support. However, we can expect to see smart upmoves if it closes above the level of Rs 222. We would advise our readers to hold this stock with a stop-loss of Rs 205 on a closing basis, as the stock is likely to move higher from the current levels.