Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
The market is making tiny moves with an increased intraday volatility. On Thursday, it closed on a positive note and garnered a net gain of 135 points during the last five trading sessions. At the beginning of the week, Nifty had tested new lifetime highs for two consec-utive days. Later, it made profit booking higher levels and formed bearish candles along with lower top & lower bottom candles. Today, it formed an inside bar as it traded within the previous day's range. It formed a dragonfly Doji candle on the weekly chart. As we expected, the market goes through a reasonable consolidation for some time. Nifty has not corrected significantly since the last year's low.
The seasonality chart shows that the benchmark index has a tendency of subdued movements during September while October-December is the most bullish quarter. Around 74 per cent of the time, it has outperformed the broader market index Nifty-500, representing 95 per cent of the market cap- italisation. So, before another leg of the bullish move, it is healthy to consolidate for a month. Even many of the indicators suggest that the market overextended and is in an overbought condition. After 618 points of the big rally last week, it formed a small body candle, closing below the opening level, which is an indication of exhaustion. The negative divergence on a 75-minute chart has confirmed the market weakness in the market. A close above 17,389 is positive, and it can resume the uptrend next week. However, in any case, if it fails to move above 17,389 and closes below 17,300, the market will experience a volatile downmove.
NIFTY DERIVATIVES:
Nifty Futures have been almost flat since the last weekly expiry. It gained only 123.75 points or 0.72 per cent in the last five trading ses-sions. The volume declined for the last two days but the open interest is rising consistently. The put-call ratio (PCR) is at 1.56, which also shows that the market is near the swing high. The next weekly PCR is at 1.13. The implied volatility for at-the-money strikes is at 11.08. India VIX has declined by 1.86 per cent to 13.94.
The total call open interest for the next weekly expiry is 4,29,959 while the total put interest is 4,85,582. The maximum call open inter-est was seen at deep-out-of-the-money strike of 18,000 with 62,322 OI, followed by at-the-money strike of 17,400 strikes with 52,046 OI. The 17,500 strike also has a significantly higher open interest of 37,621. On the put side, the deep-out-of-the-money strike 16,500 has an open interest of 62,247, followed by 17,300 strike, which has an open interest of 43,971. The 17,200 strike also has an open interest of 39,282. There was a huge short build-up seen on both the call as well as the put side. The 17,750 to 17,200 strikes have witnessed a short build-up. The 17,650 strike call open interest increased by 273 per cent. The 17,700 strike put has seen a 344 per cent increase in the open interest. Max Pain for the next weekly expiry is at 17,300. Meanwhile, VWAP is at 17,338.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
KAMDHENU LTD ..........BUY .......... CMP Rs 204.85
BSE Code : 532741
Target 1: Rs 230
Target 2 : Rs 235
Stoploss : Rs 185(CLS)
Current Observation:
•Kamdhenu is India's leading company, dealing with manufacturing, distribution, marketing, and branding. The company is the largest TMT selling brand in the country in the retail segment. Kamdhenu Paints is also a leading paint brand. It has a network of over 7,500 dealers for steel distribution and over 4,000 for paints distribution across India. The company plans to invest Rs 200 crore in expanding the paints business. It aims to garner revenue of Rs 1,000 crore from the paints segment in the next five years.
• Technically, the stock is trading above the prior pivot level while the volume recorded is above average. The stock is above the 40, 30, and 10-weekly averages and is also, meeting Mark Minervini's trend template rules. The stock, trading above Daryl Guppy's MMA set up, is a bullish sign. It is above the 50-DMA and 20-DMA. The weekly MACD has given a fresh buy signal. The weekly ADX (45.77) is showing solid trend strength. The weekly RSI took support at 50 and bounced to a strong bullish zone. The Elder impulse system has given a bullish signal. The stock is above the anchored VWAP. It has retraced above the 61.8 retracement of the prior downtrend, which is also a bullish sign.
• In a nutshell, the stock is in a strong bullish trend. A sustained move above Rs 195 is positive and it can test Rs 230 in the short term. Maintain a stop-loss at Rs 185. Above Rs 230, continue with a trailing stop-loss for a target of Rs 235.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Pidilite Industries Ltd at Rs 2,341.95 in issue no. 46 (dated September 06, 2021). Post our recommendation, the stock has witnessed a consolidation along with below-average volume. Currently, it is hovering around our recommended price. However, we can expect to see smart upmoves if it closes above Rs 2,362 level. We would advise our readers to hold this stock with a stop-loss of Rs 2,235 on a closing basis as the stock is likely to move higher from the current levels.