Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :The market closed positively on Thursday with a smart recovery from the day's low. Nifty opened with 77 points gap down and recovered thereafter. From the day's low, it gained about 255 points and finally closed at 14,406.15 with gains of 109.75 points. On a weekly basis, it has lost 175.30 points in the last four trading sessions.
In any case, if it closes above the 14,560 level on Friday, the market may turn positive in the short term. Nifty has broken the long channel support line drawn from March 2020 low and 20-weekly average. It is also trying to form another indecisive candle on the weekly chart. Importantly, the short to medium-term trend indicator, 50-DMA, has begun to trend down. Simultaneously, for the last six weeks, the bears are failing to pull down Nifty below 14,265 on a closing basis. It has tested this level at least six times during this period. It breached the 14,265 levels on all three trading days this week on an intraday basis.
The RSI is bouncing from the trendline support, but it is below its nine-period average on the daily chart. With Thursday’s move, none of the indicators turned positive or gave any bullish signal. The rally may be a result of the short-covering amid weekly derivatives expiry. The ADX is still above the 25 levels, and +DMI has not gained on a positive day. These signs indicate that the index is clearly lagging on strength. Even the stochastic oscillator did not turn positive. Interestingly, the benchmark index is still below the shorter period average of 5-EMA.
For the first time after September 2020, Nifty is about to make a lower low on the monthly chart. There are several bearish patterns and indications available in the current structure. First, during March 2021, it made a monthly lower high, and April 2021 seems to be fol-lowing it up with a monthly lower high as well as a lower low, though the month has another week left. We are cautious in the market as this structural change looks significant after a year-long uptrend.
NIFTY DERIVATIVES:
Nifty Futures lost 186.70 points or 1.27 per cent in the last four trading sessions or since the close of the last weekly expiry. It is 78 points above March series close. The volume is less than the previous day or just at an average level. On a positive day, the open interest (OI), which declined by 1.23 per cent, indicates short covering. Nifty advance-decline ratio was almost 1:1 as 28 stocks advanced while 22 declined. The put-call ratio (PCR) declined to 1.17 as the monthly series is near the expiry. The rollovers were at 8.23 per cent. India VIX is up by 2.68 per cent and reached above the 23 levels. Since the last weekly expiry, VIX is up by 10.22 per cent from 20.89 to 23.02. This shows the increased volatility in the market.
The total call open interest is at 4,84,882 while the total put open interest is at 5,66,254. The highest call open interest is at deep-out-of-the-money strike 15000, of 53,619, followed by 14,500 strikes with 32,928 OI. On the put side too, the deep-out-of-the-money strikes 14000 saw the highest OI of 64,524, followed by 14,200 strikes with 37,667 OI. There is a short-covering seen in 14,450 strike calls and 14,750 strike puts. The 14,350 strike puts open interest increased by 246.11 per cent. The 14,100 strike call saw a 373.64 per cent rise in the OI. At-the-money (14,400 strikes), the open interest of call & put increased by 64 per cent and 72 per cent, respectively. The present derivative data suggests Max Pain for April series is at 14,500.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
MASTEK LIMITED​......... BUY ............ CMP Rs1,392.65
BSE Code : 523704
Target 1 : Rs 1,560
Target 2 : Rs1,600
Stoploss : Rs 1,250 ( (CLS)
✓Current Observation: Mastek Limited is a global technology services company offering digital services and software for large public & private enterprises in the UK, US, Middle East, Asia-Pacific, and India. The company services include application development, Oracle suite & cloud migration, digital commerce, application support & maintenance, business intelligence (BI) & analytics, assurance & testing, and agile consulting. Mastek is emerging as one of the leaders in enterprise digital transformation companies.
✓Technically, the stock is forming a 14-week cup & handle formation with over 27 per cent depth. It is trading just 5 per cent below the pivot level. It is trading above all the short and long-term moving averages. Its relative price strength is as high as 95, which means that the price is outperforming 95 per cent of the listed stocks. The EPS strength of 99, and the buyers' demand at A+ show that it is meeting most of the CANSLIM characteristics.
✓The stock is also meeting Mark Minervini's trend template rules. The weekly MACD is about to give a buy signal while the RSI is in a bullish zone. The directional indicators are showing bullish strength. The ADX (31.28) shows strength in the current uptrend. In short, the stock is in a strong uptrend and is about to move above the prior pivot.
✓Based on the above observations, we expect the stock to move higher from the current levels and test the levels of Rs 1,560, followed by Rs 1,600 in the short-term. The stop-loss can be maintained at Rs 1,250 level on a closing basis.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Glenmark Pharmaceuticals Ltd at Rs 536.80 in issue no. 26 (dated April 19, 2021). Post our recommendation, the stock moved higher in line with our expectations and went onto touch the level of around Rs 590. We had given a ‘book profit’ message at the level of Rs 574.45 via our SMS service on April 16, 2021. Thus, investors, who had taken positions, according to this strategy, would have made a decent profit.