Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
Nifty opened at a new all-time high and crossed the 16,700 mark. However, it failed to hold onto its initial gains and declined almost 150 points from the day's high. At the end of the day, Nifty closed at 16,568.8 with a 45.75-point loss. During the last four trading sessions, Nifty reg-istered a net gain of 204.5 points or 1.25 per cent.
On Wednesday, after scaling new highs, Nifty did not sustain at higher levels and witnessed profit booking. It formed a dark cloud cover candle, which is a bearish sign. However, Nifty formed a higher high and a higher low candle. Even though the index declined by only 45 points, the index breadth is negative and signalled that the market would enter into another round of consolidation. The mid and small-cap under-performance is another negative factor for the market at the current juncture. A majority of index stocks are looking tired at their highs. In any case, if Nifty closes below 16,535, we would see the retest of the 16,360 zone, which is the breakout level. The 20-DMA support is at 16,138. As we mentioned on Wednesday, the mean reversion may be a reality soon! Only a decline below 16,138 or 20-DMA may give short-term bearish signals. The negative divergences emerged again in a lower timeframe, which is an early caution for the bulls. The MACD has given a sell signal on a 75-minute chart. As the weekly expiry is in place, the market may witness volatile moves. Try to be with a neutral strategy till it gives clear trend indications.
NIFTY DERIVATIVES:
Nifty Futures also gained 213.70 points or 1.31 per cent since the last weekly expiry. After three consecutive days of positive closing, it declined on Wednesday with a massive volume. The open interest also declined by 4.55 per cent. This shows that the long unwinding is happening in the market. The put-call ratio (PCR) also declined significantly from 1.79 to 1.36 on Wednesday because of unwinding positions. The implied volatility also declined to 10.08 and this is the reason why options premiums are less attractive. A week before monthly expiry, the rollovers have not picked up much as they are just at 10.33 per cent.
The total call open interest is at 7,10,861 while the total put open interest is at 9,56,538. The maximum call open interest is at out-of-the-money strike, 17,000 with 68,771, followed by 16,700 strikes with 63,988 OI. The 16,600 strike also have a higher open interest of 60,669. On the put side, the maximum open interest is at 16,500 strikes with 91,753. Deep-out-of-the-money strike, 16,000 also has an open interest of 81,380. The 16,400 strike has an OI of 59,271. Besides, the 16,200 & 16,300 strikes also have a significantly higher OI of over 49,000. From 16,550 to 16,950, strike calls have witnessed a short build-up. The 16,300 to 16,500 strikes have seen the long unwinding. On the put side, the 16,750 to 17,000 strikes have seen a long build-up. From 16,250 to 16,700, strikes witnessed a short build-up. For August monthly series, Max Pain is at 16,500 while the VWAP is at 16,614.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
UNITED BREWERIES LTD ..........BUY .......... CMP Rs1,495.00
BSE Code : 532478
Target 1: Rs 1,610
Target 2 : Rs 1,650
Stoploss : Rs 1,400 (CLS)
Current Observation:
•United Breweries is synonymous with its flagship brand, Kingfisher. With several manufacturing facilities and a strong distribution network, the brand is now available in 69 countries. During Q1FY22, the company reported gross revenue of Rs 2,652.63 crore and achieved 110 per cent growth YoY while its EPS grew at 127 per cent. n •Technically, the stock is trading at the pivot level as well as near its lifetime high. The stock has formed a seven-week flat base. It crossed the pivot level on an intraday basis. The massive volume is indicating that the smart move is coming. The stock is trading 6.04 per cent above the 50-DMA and 4.57 per cent above the 20-DMA. It is also trading above the MA ribbon along with the MACD line crossover. Besides, the signal line is above the zero lines, which is a bullish sign. The RSI closed above the prior swing highs and zoomed into the above bullish zone. The ADX (26.96) shows solid trend strength. In all timeframes, the indicators turned very bullish on the stock. The stock is also above the anchored VWAP resistance. The weekly Elder impulse system and Pring's KST have given buy signals.
• In short, the stock is at a lifetime high with a strong bullish indication. A move above Rs 1,499 is positive and it can test the level of Rs 1,610 – Rs 1,650 in the short term. Maintain a stop-loss at Rs 1,400.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of KEI Industries Ltd at Rs 752 in issue no. 43 (dated August 16, 2021). Post our recommendation, the stock witnessed a con-solidation along with below-average volume. Currently, it is hovering around the 34-day EMA level. However, we can expect to see smart upmoves if it closes above its 20-day EMA, which is currently quoting at Rs 728.60 level. We would advise our readers to hold this stock with a stop-loss of Rs 705 on a closing basis, as the stock is likely to move higher from the current levels.