Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :Nifty finally traded above the stronger resistance line at 14,880. However, it failed to close above the resistance and formed a bearish candle, Gravestone Doji, or a shoot-ing star candle. After testing the neckline five times, it had finally broken out of a small-inverted head & shoulders pattern in the morning, which ignited a lot of hope for a decisive breakout.
During the last four trading sessions, Nifty has gained merely 6.45 points. It also formed a Doji candle on the eve of the weekly expiry. On Monday, it has fallen by over 1.5 per cent and filled the gap of March 30. Most importantly, Nifty is oscillating around 50-DMA for the last 14 sessions and finally, made a decisive close above it. The close above the 50-DMA is a positive sign for the market direction in the near term but the bearish candle at a resistance level is not a good sign. For now, the zone of 14,880-14,900 is likely to act as a resistance. At the same time, the 50-DMA 14,804 and the 20-DMA 14,775 would act as a support zone. Even if Nifty closes below Thursday’s low of 14,821, it would indicate weakness in the market.
We expect Nifty to consolidate between 14,460 and 14,880 if it fails to close above the 14,880 levels in the coming trading session. On the upside, a close above the level of 14,880 would take Nifty towards the levels of 15,050-15,200. On the other hand, a close below the 14,821-14,775 level is negative, and in that case, it may test 14,469 once again. However, for a clear trend to emerge, Nifty has to breakout the broader 1,000-point range of 15,431-14,469. Unless these two levels are taken out, the market may consolidate and spend some more time within this range.
NIFTY DERIVATIVES:
Nifty Futures lost 15.35 points since the last weekly expiry, and it formed a perfect Doji candle. Barring Monday, the volumes are declin-ing. The volume is the lowest since March 10. It has once again proven that the low volume during the rise is not trustworthy. Thursday’s breakout failed to close above the prior resistance. Nifty Futures closed with 50-point gain and the open interest declined by 0.62 per cent, which is a sign of short covering. The put-call ratio (PCR) is at 1.68, which is at a higher level compared to April 1. As the PCR is at a swing high, it indicates that the upside move is limited in markets. For the next weekly expiry, the PCR is at 0.88, which is also higher than the last week. The total call open interest is at 2,50,594, and the total put open interest is at 2,18,689. The maximum call open interest 27,092 is at 15,000 strikes, followed by an out-of-the-money strike 15,500 at 26,365. In the 14,950 strikes, the call open interest was up by 657 per cent, as the open interest increased from 613 to 4,645. On the put side, the maximum open interest is higher in the deep out-of-the-money strike of 14,000, where the OI is 20,627, followed by 14,500, 14,900, and 14,800 strikes with an open interest of 16,843, 14,932, and 12,560. The highest open interest in the deep out-of-the-money put options indicates that the traders bet on big and multi-bagger options. The current options data shows that the Max Pain for the next weekly expiry is at 14,900.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
SEQUENT SCIENTIFIC LTD​ ......... BUY ............ CMP Rs 268.95
BSE Code : 512529
Target 1 : Rs 305
Target 2 : Rs315
Stoploss : Rs 235 (CLS)
✓Current Observation: Sequent Scientific is a pure-play animal healthcare company that has an annual turnover of Rs 1,180 crore. It is India's largest and the twentieth-largest animal health company in the world. The company has metamorphosed from an India-centric, API-led firm serving the unregulated markets to a global animal health company underpinned by a vertically integrated strategy, focus on formulations, and worldwide footprint. The revenue grew by 13.2 per cent in Q3 of FY21. EBITDA is at 34.5 per cent while the net profit grew by 83.3 per cent to Rs 372 crore. India has now emerged as an important market with business more-than-doubled in the last nine months.
✓Technically, the stock is trading at a five-year high and has broken out of a 7-week cup formation. The volume is above the average and confirming the breakout. The relative price strength is as high as 90 while the EPS strength is at 94. Recently, the institutions increased their stake in the company by 13.12 per cent. The stock is meeting a majority of CANSLIM characters. The daily and weekly momentum indicators are showing a bullish strength in the stock. As it is trading at a new high, all the averages are trending upside. On the weekly chart, the RSI is consolidating above the zone of 70 since August 2020 and is showing a further possibility of price rise. During the cup formation, the declined MACD histogram began to rise again, which is a positive momentum sign. The ADX is at 40.40, showing the strength in the trend, is above the +DMI and -DMI.
✓In short, the stock registered a solid bullish breakout. Buy this stock in the zone of Rs 265-Rs 277 with a stop-loss of Rs 235. Its short to medium term target is at Rs 305, followed by Rs 315.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Sundram Fasteners Ltd at Rs 799 in issue no. 24 (dated April 05, 2021). Post our recommendation, the stock did not sus-tain at higher levels and slipped below the stop-loss level. We recommend our readers to exit with a loss. We exited the stock at Rs 737.30 on April 06, 2021.