Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Nifty continues to move around the 20-DMA, with a spike in the daily ranges. It took support at 50-DMA twice during the last seven days. During the consolidation phase, the swings were limited to only two to three days. Nifty is still at the level of June 7. It has not moved anywhere during the last two months. Since July 1, Nifty has just added 98 points, and it is exactly at the mid-point of the consolidation range. Because of this sideways action, the Bollinger bands are moving like parallel lines. The momentum is completely neutral.
There are some positives that appeared in the index after Wednesday's massive recovery from the lower levels. The price made a lower low, but the RSI made a higher low. This condition is meeting Andrew Cardwell's rules for bullish entry. Unless the RSI closes below 48, the index may trade with a positive tone. The daily +DMI is showing an uptick, and the ADX crossed the double- digit figure, which indicates that the positive strength is improving. It formed a hammer kind of candle on Wednesday, which is also bullish while on Thursday, Nifty has managed to close above hammer candle high, which is a confirmation of the bullishness.
Going forward, whether Nifty moves above 15,900 levels decisively or not, that's the big question, which most probably, would be soon answered as key events are lined up in the upcoming week, which includes RBI policy meet as well. The consolidation is in a near mature stage. A complete bar closing above 15,900 along with RSI above 56, is a very positive sign, which would result in Nifty testing the levels of 16,240 initially.
NIFTY DERIVATIVES: Nifty Futures’ monthly chart has formed a Doji candle as it closed at almost the opening level. On June 24, Nifty closed at 15,791.45 while today, it ended at 15,780. Since the last weekly expiry, it declined by 36.70 points or 0.23 per cent in the last five trading sessions. During this month, Nifty traded in the 460-point range. For the last 30 days, the benchmark index is trading in the range and not giving any decisive trades. Barring Wednesday’s move, the option sellers benefitted during the last week. Most of the neutral strategies were successful. August month's put-call ratio (PCR) is at 1.27, showing that the market is neutral to overbought condition. For the next weekly expiry, the PCR is at 0.84. The rollovers stood at 74.63 per cent i.e. below the three-month average (76.06) and six-month average (77.56). The rollovers are less than last month (84.61) too. Because of the sideways trend, the traders are not comfortable rolling over the positions.
For the next month, the total call open interest is at 3,16,932 while the total put open interest is at 4,03,541. For the next weekly expiry, the total call open interest is 4,21,090, and the total put open interest is 3,55,481. The maximum call open interest is the at-the-money strike of 15,800 with 58,374, followed by 16,000 strike with 48,841 open interest. The 15,900 strike also have a higher open interest of 39,870. On the put side, the maximum open interest is at 15,700 strike with 38,131, followed by an at-the-money strike with 35,990 open interest. From 16,150 to 15,900 strikes, the calls witnessed short built-up. The 16,050 strike has seen a 502 per cent increase in the open interest. On the put side, the 15,450 to 16,150 has seen a short build-up. The 16,100 strike has seen a 283 per cent increase in the put open interest. The Max Pain for the week is at 15,800 while the VWAP is at 15,780.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
RUPA & COMPANY LTD. ..........BUY .......... CMP Rs 496.05
BSE Code : 533552
Target 1: Rs 535
Target 2 : Rs 550
Stoploss : Rs 470 (CLS)
• Current Observation: Rupa & Company Ltd is a leading knitwear brand in India, covering the entire range of knitted garments from innerwear to casual wear. It has the capacity to produce over seven lakh pieces of finished garment per day. The company has evolved to become the frontrunner in India and a leading player in global markets with far-reaching footprints and millions of satisfied customers. It has a state-of-the-art research & development facility at Domjur (West Bengal) manufacturing unit.
• Technically, the stock is in an eight-week flat base. It took support at a 10-week moving average during the current consolidation. It is trading 9 per cent above the 50-DMA and 57 per cent above the 200-DMA. Besides, all the moving averages are trending higher. Its relative price strength rating is as high as 80, which shows the outperformance in the broader market. The daily MACD is about to give a buy signal above the zero line. As the Bollinger bands narrow, and the stock is trading above the 20-DMA, expect an impulsive move on the upside. The RSI is in a bullish zone. The Elder impulse system has given a buy signal.
• In short, the stock is in a stage-2 flat base. A breakout will lead to a big move on the upside. Accumulate this stock above Rs 497-Rs 500 with a stop-loss of Rs 470. The short-term target is placed at Rs 535 while the medium-term target is at Rs 550.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of APL Apollo Tubes Ltd at Rs 1,632.45 in issue no. 40 (dated July 26, 2021). Post our recommendation, the stock moved higher in line with our expectations and went onto touch the level of around Rs 1,849.85. We had given a ‘book profit’ message at the level of Rs 1,716.75 via our SMS service on July 27, 2021. Thus, investors, who had taken positions according to this strategy, would have made a decent profit.