Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
The stock market registered a new lifetime high close during the week. Nifty is just 0.6 per cent away from its lifetime high.
The interesting fact is that the benchmark index formed two identical hanging man candles for consecu-tive days. The adage, ‘sell in May and go away’ seemed to be obsolete this time. In fact, Nifty advanced 706.75 points or 4.83 per cent during this month. On a weekly basis, in the last five days, it went up by 431.8 points or 2.90 per cent.
Nifty formed a 66-day cup pattern during the con-solidation period, with a cup depth of 7.6 per cent. In any case, if Nifty sustains above the levels of 15,315, there’s a probability of reaching the target of the cup pattern, i.e., another 7.6 per cent move in less than 66 days.
As mentioned earlier, Nifty met 50 per cent of the ascending trian-gle breakout target, which triggered on May 18. It formed an indecisive bar of long-legged small body candle at a lifetime high, which is not a convincing move. At the same time, this volume move is lacking the conviction of the bullish bias. All the technical indicators are showing bullish strength because the price closed at a new high. The RSI is in a bullish zone as well as above the consolidation. All short and medi-um-term averages are trending up. It is not wise to look at the indicators at the current juncture.
Meanwhile, the trend strength i.e. the ADX lies at 13.55 while it was at 32.32 on February 16. And now, at the same level, the same trend strength indicator is at just 13.55, which is less than half. Apart from that, the cash volumes are also a matter of concern. The insti-tutional participation was limited. There are several puzzling moves during the last 66 days. As there is no bearish signal but only indecision moves, be with a positive bias with prior bar low as a trailing stop-loss.
NIFTY DERIVATIVES:
Nifty Futures is up by 405.75 points or 2.72 per cent since the last weekly expiry. May series gained 437.85 points or 2.94 per cent. The whole month witnessed a low volume in the derivatives too. Even the open interest declined during the last three weeks. Comparatively, the total open interest of the month is much less than the previous month. The next month's put-call ratio (PCR) is at 1.56.
For the next weekly expiry, the PCR is at 1.04, which is higher than the average that was at the beginning of the week. The rollover was witnessed about 69.39 per cent, which is less than the last month as well as the last three and six month's average. The lower rollovers indicate that there’s less con-viction on the trend. For the next weekly expiry, the total call open interest is at 2,43,831 while the total put open interest is at 2,53,818. The 16,000-strike call has the highest open interest of 27,653, followed by 15,700 strikes with 20,433 OI. At the money, 15,350 strikes have just 7,868 open interest. On the Put side, 15,200 strikes have the highest open interest of 22,962, followed by 15,000 strikes with 21,449. The 15,300 strike has an open interest of 20,626. The deep-out-of-the-money strikes have 14,500 strikes put with an open interest of 17,812, which is more than at-the-money strikes. The 15,350 has just 3,711 OI. Max Pain for the next week is at 15,300. The IV has collapsed to 18.34 from 22.83 at the beginning of the month. Only 10.71 per cent of the time, the IV is at this level historically. India VIX also collapsed from 23.02 to 19.91, which is a decline of 13.5 per cent. Low volatility and low OI volume may unveil a new trend next month. We may get the clues during the next week.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
TATA CONSULTANCY SERVICES LTD..................BUY ................... CMP Rs 3,180.20
BSE Code : 532540
Target 1 : Rs 3,354
Target 2 : Rs 3,400
Stoploss : Rs 3,065 (CLS)
Current Observation:
✓Tata Consultancy Services (TCS) is an IT services, consulting & business solutions company as well as India's no.1 company as per market capitalisation. The company has domain expertise in a broad set of industries, including banking, financial services & insurance, retail and CPG, communication & media, manufacturing, and many more. Geographically, TCS operates in all five continents, with North America and Europe constituting the largest markets for the company.
✓Technically, the stock is in consolidation and moved above the minor high. It is also making highs from the base around the level of Rs 3,000. Today's price action has formed a minor swing high. It moved above the 50-DMA decisively and is currently, trending even beyond it. The volumes are increasing for the past five days in the upmove, which indicates that the bottoms are in place. The RSI is in a bullish zone as well as above the base. The MACD line moved above the zero lines on a daily chart while the histogram is showing bullish momentum.
✓Besides, on the weekly chart, the price is moved above the Anchored VWAP resistance. After four weeks of trading below the long upward channel, it tried to enter into the channel with today's price action.
✓Based on the above observations, we expect the stock to move higher from the current levels and test the levels of Rs 3,354, followed by Rs 3,400 in the short term. The stop-loss can be maintained at Rs 3,065 level on a closing basis.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Phillips Carbon Black Ltd at Rs 232.50 in issue no. 31 (dated May 24, 2021). Post our recommendation, the stock witnessed a consol-idation along with low volume. Currently, it is hovering around the breakout level. However, we can expect to see smart upmoves if it closes above the level of Rs 230. We would advise our readers to hold this stock with a stop-loss of Rs 214 on a closing basis, as the stock is likely to move higher from the current levels.