Technicals Analysis

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY :

The cabinet approval of the bad bank proposal has boosted the market sentiment, enabling it to close at another record high. The stocks of the banking, financial services & insurance (BFSI) sector led the market today. The frontline index i.e. Nifty closed at 17,629.50 with a 110.05 points gain. Bank Nifty inched higher by 2.22 per cent while FinNifty gained 1.09 per cent. Interestingly, India VIX is also up by 4.97 per cent. Though the market has reached a record high, the market breadth is negative with 1,025 declines and 915 advances.

Nifty has broken out of a five-day base and registered three consecutive new lifetime highs during the last four trading sessions. On an hourly chart, it has almost met the cup breakout target. As we project-ed in the previous week's analysis, the initial target of 17,410 has been achieved and is near the next target of 17,740. Once again, it has been proven that the tight range breakouts will result in a faster retracement. It gained over 270 points in just two days. The overbought is just a condition and not a bearish sign. The RSI has crossed the zone of 80 even in the weekly chart. Historically, all the tops were made when the weekly RSI reached 80 or a little above. Now, the visible target is just another hundred points. With the leading indicator reaching an extreme overbought condition, it is better to be cautiously optimistic. Maintain a strict stop-loss to protect the profits. As we already have the upside target of 17,740, let us examine the possible downside targets. The first rule of stop-loss in a strong bullish trend is a close below the prior bar low. Today's low of 17,510 is the first stop-loss. A move below 17,510 will give the first sign of weakness. It will give bearish signals only if it’s below 17,343-254. The 8-EMA is currently at 17,418. These are levels to be watched out for and maintain the stop-losses according to the individual risk appetite. However, there are no bearish indications.

NIFTY DERIVATIVES:
Nifty Futures gained 242.35 points or 1.42 per cent in the last four trading sessions. On Tuesday, Nifty recorded the lowest volume but for the last two days, the volume has picked up. The open interest is also consistently higher. Today, Nifty Futures is up by 0.41 per cent while the open interest increased by 3.06 per cent. Bank Nifty OI is higher by 6.74 per cent. This data shows that the long positions were buildup in the market. At-the-money implied volatility is at 11.53. The month-ly put-call ratio is stable at 1.58, and the next week's PCR is at 1.41, which is the highest in recent times for the weekly series.

The total call open interest for the next weekly expiry is at 3,76,120, and the total put open interest is at 5,07,978. The call open interest is spread till 18,200 level. The 18,000 strike has an open inter-est of 48,949, followed by 17,600 strikes with 29,419. The 17,500, 17,700, 17,800, 18,100, and 18,200 strikes have an open interest between 20,000 and 25600. On the put side, the highest open interest is at 17,000 strikes with 55,011, followed by a deep-out-of-the-money strike of 16,500 with 53,032. The 17,500 strike has an OI of 40,265. Interestingly, the 16,000 also have an OI of 27,877. The 17,950 strike call has seen an increase of 372 per cent in OI. The 17,350 to 17,450 strikes calls have seen short-covering while the other strikes have a long buildup. On the put side, selling was seen in almost all the strikes. Max Pain for the next weekly expiry is at 17,600 while the VWAP is at 17,565.

TECHNICAL RECOMMENDATION

STOCK STRATEGY

CYIENT LTD ..........BUY .......... CMP Rs 1,100.00

BSE Code : 532175
Target 1: Rs 1,217
Target 2 : Rs 1,245
Stoploss : Rs 1,020(CLS)

Current Observation:
•The company offers engineering & development services to the aerospace, defence, transportation, communications and others. It has over 300 clients in almost 14 countries. During the last quarter, it won four large deals with a total contract potential of $46 million. The company expects to grow double-digit in FY22 in services and expects EBITDA to improve by 200 bps.
• Technically, the stock has broken out of a Stage-2, eight-week cup breakout. For the last three weeks, the volume recording was above average. Its relative price strength is good at 78. The 10-weekly moving average is acting as strong support since March 2020 low. The stock is currently trading at a new lifetime high and has also, extended 127.6 per cent of the prior downtrend.
• The ADX (57.72) shows a solid strength in the weekly trend. The RSI is in a strong bullish zone. The weekly MACD also has given a fresh buy signal. It is trading above the anchored VWAP. The Elder impulse system has given a fresh buy signal on the weekly chart. The stock is also meeting all the bullish setup rules.
•Accumulate this stock above Rs 1,092 with a stop-loss of Rs 1,020. The short-term target is placed at Rs 1,217. In the medium term, it can touch Rs 1,245. 

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Kamdhenu Ltd at Rs 204.85 in issue no. 47 (dated September 13, 2021). Post our recommendation, the stock has witnessed a throwback along with below-average volume. On Thursday, the stock took support near the 8-day EMA level and resumed its upward journey. However, we can expect to see a smart upmove if it closes above the prior high of Rs 213.60 level. We would advise our readers to hold this stock with a stop-loss of Rs 185 on a closing basis, as the stock is likely to move higher from the current levels.