Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
The equity market rallied during the current month with no major correction. It broke the two-month-long consoli-dation at the beginning of the month and rallied 874 points or 5.54 per cent. Unlike pre-vious months, Nifty formed the most bullish candles along with few bearish or indecisive candles during the month. It is the most promising month after May 2021.
The benchmark index is consolidating for the last five days. Nifty formed two con-secutive indecisive bars in the last two days. The previous week's shooting star candle failed to get the bearish confir-mation. However, it formed a hanging man candle in the current week and signalled that the market might consolidate before taking a decisive direction. The two back-to-back bearish candles on the daily chart are indicating exhaustion in the market. Last Friday, it faced resistance at the upward channel resistance line and formed a parallel high. In any case, if the index falls below 16,376 levels, the double top pattern will turn into reality. In such a case, Nifty may retest the two-month-long consolidation breakout point. As long as this level is protected, the index may consolidate for some more time. A move above 16,713 will resume the uptrend with a target of 17,000-17,265 zones.
NIFTY DERIVATIVES:
Nifty Futures gained 833.40 points or 5.27 per cent during August series. For the last four months, the volume of Nifty Futures is declin-ing. This low volume and low IV period is an indication of more prob-able significant volatile moves in the near future. The current month's rollovers stood at 74.41, which is less than the previous month. The rollovers are a little lower than the three and six-month averages. The next month's put-call ratio (PCR) is at 1.44 while the next week's PCR is very low at 0.91, which indicates that the index may be in the neutral zone. The implied volatility (IV) is a little higher at 10.7.
For the next weekly expiry, the total call open interest is at 4,32,449 and the total put open interest is at 3,90,060. At-the-money strike of 16,700, call has the highest open interest of 52,114, followed by deep-out-of-the-money strike 17,200 with 42,789 OI and 16,800 strikes with 41,293 OI. Even out-of-the-money strike 17,000 has a significant OI of 40,538. On the put side, the 16,600 strike has the highest open interest of 46,810, followed by 16,500 strikes with 38,963. A huge short build-up was seen across the Call strikes. On the put side, 16,250 to 16,700 strikes witnessed a short build-up while other strikes showed a long build-up. The 16,750 strike call witnessed a 262 per cent OI rise. On the put side, 16,900 strike has the highest rise by 127 per cent. Max Pain for the next weekly expiry is at 16,600 while the VWAP is at 16,636.90.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
RELIANCE INDUSTRIES LTD ..........BUY .......... CMP Rs2,230.6
BSE Code : 500325
Target 1: Rs 2,370
Target 2 : Rs 2,410
Stoploss : Rs 2,140 (CLS)
Current Observation:
•Reliance Industries is the country's multinational conglomerate, which operates in diverse sectors & businesses, including energy, petrochemicals, natural gas, retail, telecom, and textiles. It is the largest listed company in terms of revenue and market capitalisation. This Fortune 500 company is one of the most profitable companies.
• During Q1FY22, the company reported a net profit of Rs 13,806 crore, up by 66.7 per cent. The consolidated EBITDA grew to Rs 27,550 crore, up by 27.6 per cent. The total revenue stood at Rs 1,58,862 crore, up by 57.4 per cent YoY.
• Technically, the stock is consolidating for the last one year. After giving 170 per cent in just 6 months from March 2020 lows, it retraced almost 38.2 per cent. The stock is also making higher lows & parallel highs, which resemble an ascending triangle. It reached the prior swing high. It is decisively trading above the long and short-term moving averages. It is 4.96 per cent above the 50-DMA and 4.83 per cent above the 20-DMA. The 20-DMA crossing 50-DMA is a short-term positive for the stock. Interestingly, on a line chart, the stock broke the sloping trend line resistance. The momentum is increasing positively on the daily and weekly charts. Currently, the price retraces over 75 per cent from the recent low. The weekly RSI is in a bullish zone and near prior swing high. It is also above the anchored VWAP resistance. The Elder impulse system and Pring's KST have given buy signals.
• In short, the stock is at the resistance level of an ascending triangle. A move above Rs 2,255 is positive and it can test the Rs 2,370 – Rs 2,410 levels. Maintain a stop loss at Rs 2,140. Above Rs 2,370, continue with a trailing stop-loss.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of United Breweries Ltd at Rs 1,495 in issue no. 44 (dated August 23, 2021). Post our recommendation, the stock witnessed a minor correction along with low volume. Currently, it is hovering around the 20-day EMA level. However, we can expect to see smart upmoves if it surges above its recent swing high of Rs 1,515 level. We would advise our readers to hold this stock with a stop-loss of Rs 1,400 on a closing basis, as the stock is likely to move higher from the current levels.