Technicals Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : The equity market bounced from the low after a sharp decline during the last week. During the last four trading sessions, Nifty formed higher lows and is finally able to close at the five-day high.
On a weekly expiry day, Nifty went up by 234.75 points or 1.37 per cent and reclaimed the level of 17,400. All the sectors participated in today's rally. The broader market indices and the positive market breadth show strength in the rally. After a Doji candle on Monday, Nifty was able to overcome the selling pressure of the last two days. It retraced above the 38.2 retracement level and is in a rally attempt mode. After over a 9 per cent fall, Nifty has recovered 3.68 per cent from the bottom and is up by 2.2 per cent from last week's close.
Today's rally meets the follow-through day rules. The present retracement can continue for some more days. It can test the levels of 17,500 and 17,664 as long as it trades above the 17,260-324 zone of support. Nifty decisively closed above the 5 and 8-EMAs and formed a strong bullish candle by closing at the day's high. It also entered into the downward channel. On a 75-minute chart, Nifty has broken out of an ascending triangle with volume. The pattern target is almost 17,900. The 20-DMA is at Rs 17,656, which is near the 50 per cent retracement level. This may act as a short-term resistance level. For now, be with a positive bias; no more shorts as long as it trades above 17,324.
NIFTY DERIVATIVES: Nifty Futures have declined by 149 points or 0.84 per cent since the last weekly expiry. The volumes are a little above the average volumes. The daily trading ranges were increased during the last week. On December 2, Nifty Futures went up by 1.27 per cent while the open interest rose by 3.79 per cent, indicating the long build-up. The putcall ratio (PCR) is at 1.34 for the monthly expiry. For the next week's expiry, the PCR is at 1.37, which indicates the rally is near the swing high. The at-the-money implied volatility is at 15.85, which is higher. This is the reason why the option premiums are higher. For the next weekly expiry, the total call open interest is at 4,30,562, while the total put open interest is 5,90,667. The deepout- of-the-money strike of 18,000 has a maximum open interest of 41,200, followed by an at-the-money strike of 17,400 with an open interest of 38,946. The 17,500 and 17,700 strikes also have an open interest of 33,133 & 32,652, respectively. On the put side, the 17,000 strike has an open interest of 62,472. Interestingly, very deep-out-ofthe- money strike 16,000 has an open interest of 52,112. The 17,300 and 17,200 strikes have an open interest of 47,509 & 40,980, respectively. Many call strikes have seen the long build-up. Max Pain for the next week is at 17,300 while the VWAP is at 17,337.
TECHNICAL RECOMMENDATION
STOCK STRATEGY
APL APOLLO TUBES LTD. ............... BUY .......... CMP Rs 948.00
BSE Code : 533758
Target 1 : Rs 1010
Target 2 : Rs 1025
Stoploss : Rs 890 (CLS)
• Current Observation: APL Apollo Tubes Limited is the largest producer of structural steel tubes in India, with a capacity to produce 2.6 million tonnes per annum. It has a presence in 20 countries. The company has a strong distribution network of over 800 distributors and more than 50,000 retailers across India. It has 10 manufacturing units.
• With a strong outlook for structural steel products, the institutions accumulated the stocks as they increased the stake by 92 per cent during the last quarter. About 201 funds have been invested in the stock. The master score of B is close to being the best, as per the CANSLIM investing philosophy.
• Technically, the stock has formed a 10-week cup pattern and is trading near its prior pivot. The 30-week moving average is working as strong support, and it is trending higher. It is 8.16 per cent above the 50-DMA and 26 per cent above the 200-DMA. Its relative price strength is decently higher at 71. Mansfield’s relative strength indicator is at 1.33, which shows a strong performance compared to the broader market. The Elder impulse system and the stock are trading above the anchored VWAP. The weekly MACD is about to give a buy signal. The RSI is in a strong bullish zone and is about to move above the sloping channel. The directional indicators suggest an impulsive move on the cards. Narrowed Bollinger bands on the weekly chart, indicating a big move on the upside, is a high probability.
• In short, the stock is near the prior pivot and ready to breakout. A move above Rs 951 is positive, and it can test Rs 1,010-Rs 1,025 in the short term. Maintain a stop-loss at Rs 890.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Triveni Engineering & Industries Ltd at Rs 225.90 in issue no. 06 (dated November 29, 2021). Post our recommendation, the stock moved higher in line with our expectations and went on to touch the level of around Rs 235. We had given a ‘Book Profit’ message at the level of Rs 234.25 via our SMS service on November 26, 2021. Thus, investors, who had taken positions according to this strategy, would have made a decent profit.