Technicals Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : The market witnessed volatility of 628 points since last Thursday. Even during the last five days, Nifty traded in the range of 439 points. It lost 170.14 points or 1.09 per cent in the five days. RBI’s intervention for COVID rescue plans has improved the market sentiment in the last two days.

Barring pharma, all other sectoral indices helped the market to close positively. The advance-decline ratio is also positive. Today, Nifty reclaimed above the 20-DMA and faced resistance at 50-DMA. Bollinger Bands flattened thereby, indicating some more days of consolidation within the zone of 14,880-14,264. The MACD histogram shows that the pickup is in bullish momentum. Interestingly, after four days, the positive directional movement indicator i.e. +DMI is up. The -DMI still above the +DMI but is declining. The ADX is not showing any improvement in the trend strength.

Last week, the benchmark index took support at 14,469 parallel support lines. The chances of getting a bearish confirmation to the last week's shooting star are very minimal now. It closed at Tuesday's high and negated the previous day's inside bar bearish implications. In any case, if Nifty closes above 14,734 with a volume this weekend, it will give a positive bias for the overall market. Above 14,734, Nifty may face resistance at 14,800 and 14,880 again. We need to wait & watch for a decisive breakout. However, if Nifty fails to surpass the resistance zone this time, the fall will be a sharper one and may even decline below 14,469. Next week's moves will be a crucial one for the market trend. As the broader indices, Nifty Midcap-100 and Smallcap-100 indices are trading at lifetime highs, the large-cap stocks lost the focus.

As the FIIs' selling pressure is also mounting and the DIIs have started selling, the buying support to push the market upside is lacking. This trend also showed the deceleration in volume. Unless the buying volumes increased with institutional participation, we need to be cautiously optimistic. Nevertheless, the worsening COVID-19 conditions may change the sentiment in the market at any time.

NIFTY DERIVATIVES: Nifty Futures lost 120.7 points or 0.81 per cent since the last weekly expiry. The volumes are gradually declining for the last five days. Three days of negative and two days of positive bias have not changed the market direction. Today, on a 0.73 per cent gain, the open interest is up by 6.67 per cent thereby, showing that the longs were built-up in the market. The put-call ratio (PCR) is at 1.5 for May series. For the next weekly series, the PCR is at 0.92. Meanwhile, the rollovers were seen at 7.16 per cent. Besides, India VIX is down to 22.03 from 23.30.

For the next weekly series, the open interest trends are very interesting. The deep-out-of-the-money options have above normal open interest. The 16,000 strike call open interest has the highest open interest of 45,569, followed by 15,000 strikes with 25,995 open interests. The 15,200 call has an open interest of 22,603 while ATM (14,700) strike call has an open interest of 22,549. On the Put side, the trend is almost similar. The 14,500 strike has the highest open interest of 26,425, followed by the deep-out-of-the-money strike while 13,500 strikes have an open interest of 25,956. At the same time, the 14,000 strikes put and the ATM strike (14,700) put have an open interest of 24,365 and 23,786, respectively. For the next weekly expiry, the 15,150 and 15,100 strike calls saw a short build-up. The highest percentage rise in the open interest (726.37 per cent) was witnessed in the 15,150 strike call. The 15,100 put strike saw 2,132.26 per cent rise in the open interest. The derivative data shows that next week's Max Pain is at 14,700, where the highest probability of expiry is.

TECHNICAL RECOMMENDATION

STOCK STRATEGY

SUN PHARMA ADVANCED RESEARCH COMPANY LTD .......BUY ..... CMP Rs 181.40

BSE Code : 532872
Target 1 : Rs 205
Target 2 : Rs 234
Stoploss : Rs 167(CLS)

✓Current Observation: Sun Pharma Advanced Research Company (SPARC) is a clinical-stage biopharmaceutical company. It was formed in the year 2007 through a de-merger from Sun Pharma.
✓ Technically, the stock is in stage-1 consolidation for the past two years. It fell by 85 per cent from its 2018 top of Rs 532. It has formed a complex head & shoulders pattern with two shoulders on each side. Most of the time, this pattern is bullish.
✓ A small fundamental development can trigger a breakout. The stock is trading above the 50 and 200-DMAs. On the weekly chart, it is also forming a 16-week cup formation with 32.7 per cent depth.
✓ During the last five weeks, the volumes are above average while the volumes of the current week are reported to be the highest in the last 15 weeks, showing a buying interest. The weekly MACD has given a fresh buy signal while the 20-period weekly RSI moved above the 50 zone, showing that the bullish momentum is building up.
✓ The positive directional indicator, +DMI is above the –DMI, which is also a positive sign. The flattened ADX is a neutral sign. Meanwhile, the Elder impulse system is showing a bullish bias while Pring's KST is about to give a bullish signal. The stock is also above the moving average ribbon on a weekly chart. The analyst's consensus shows bullish projections. Buy this stock in the zone of Rs 180-Rs 185 with a stop-loss of Rs 167 on a weekly closing basis. The short-term target is at Rs 205 while the medium-term target is at Rs 234.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Bajaj Finserv Ltd at Rs 11,184.60 in issue no. 28 (dated May 03, 2021). Post our recommendation, the stock was seen consolidating within the sizeable bullish candle of April 29, 2021. Moreover, it has not slipped below 50 per cent of the sizeable bullish candle yet, which gives us an indication that sooner or later, the stock may continue its journey upwards. We would advise our readers to hold this stock with a stop-loss of Rs 10,526 on a closing basis. If the stock closes above the level of 11,200- 11,250, it could witness a smart upmove and it’s likely to test our mentioned targets of Rs 11,956, followed by Rs 12,050.