23rd Feb 2018 IndiaNivesh Weekly Pulse RETAIL TECHNICAL RESEARCH The closing of Feb 2018 might decide the fate of the markets! Close 10491 Chart 1 : Nifty Daily & Hourly R1 / R2 10630/ 10700 S1 / S2 10276/ 10000 50 EMA 10558 100 EMA 10407 200 EMA 10069 Mehul Kothari Sr. Technical Analyst - Equity Tel: +91 22 62406416 mehul.kothari@indianivesh.in Market Outlook Finally the bulls managed to defend against the selling pressure during the week went by since after almost three weeks the domestic markets managed to close in green (week on week). Although the index Nifty remained stuck in a band of 10430 10300 during most of the sessions of the week but a sharp recovery in today s session helped the index to break that range and close near the 10500 mark. Even the Nifty Bank index managed to regain the 25000 mark. w going ahead the market is about to enter the last week of FEB 2018 which will decide the monthly close. There could be two possible scenarios from here on. As shown in the weekly chart, the index has found a strong support at the Rising Trend Line which we have been discussing in our daily report. Hence, till the time Nifty trades above this support of 10300 possibility of further bounce cannot be ruled out. In such scenario, the index might retest 10550 10600 zone. The bearish Pennant pattern shall get negated above 10620. On the contrary, if Nifty fails to close the month of FEB above the 10500 mark then the Bearish Engulfing pattern shown in the monthly chart of Nifty will get confirmed. Historically we have seen such patterns can bring in a consolidation or a corrective move in the markets which can last for few monthly also. In addition, this pattern has emerged after a sturdy rally and that too it coincides with the resistance formed by the rising channel as shown in the chart. Therefore, at this juncture looking at the broader picture the higher weightage should be given to the formation on the monthly chart. Thus we advise traders to remain stock specific during the pullback rally and keep booking their trading positions. In a worst case scenario, a close below 10300 mark could lead to greater panic in the markets.. IndiaNivesh Securities Ltd 23rd Feb 2018 1 of 11
Trend lines in Actions Chart 2 : SBIN Weekly (Prev. Close : 276.40) Chart 3 : IDBIBANK Weekly (Prev. Close : 77) The stock has taken support at the rising trend line on the weekly chart and hence further bounce possible. (Bullish) IDBI has confirmed a major breakout from the long term falling trend line as shown in the weekly chart which indicates further upside. (Bullish) Chart 4 : YESBANK - Weekly (Prev. Close : 323) Chart 5: ARVIND Weekly (Prev. Close : 412) The stock has taken support at the rising trend line on the daily chart and hence further bounce possible. (Bullish) Arvind has found support at the long term rising trend line as shown in the inset. A move below the same could result in a severe fall. (Neutral) Trend lines are a visual representation of support and resistance in any timeframe and a simple tool available for trend analysis. The greater the number of touch points increases the importance, break on the either side may lead to major moves or trend reversals. The above charts will help you go through recent trend line breakouts / breakdowns. IndiaNivesh Securities Ltd 23rd Feb 2018 2 of 11
Volume Shockers Chart 10 : JUBILANT Weekly (Prev. Close : 881) Chart 11 : UNIONBANK Weekly (Prev. Close : 109) The stock registered some correction with exceptional volumes on weekly chart which suggest fresh downside from here on. (Bearish) Heavy volumes and that too on a weekly chart along with breakdown indicate major supply which can further drag the stock. (Neutral) Chart 12 : BIOCON Weekly (Prev. Close : 628) Chart 13 : SKFINDIA Weekly (Prev. Close : 1840) Heavy volumes and that too on a weekly chart along with sharp pullback indicate the uptrend to resume in the stock. (Neutral) The stock registered some correction with exceptional volumes on weekly chart which suggest fresh downside from here on. (Bearish) The given stocks witnessed climatic volumes during the week went by. IndiaNivesh Securities Ltd 23rd Feb 2018 3 of 11
Bollinger Band breakouts / breakdowns Chart 14 :PERSISTENT - Daily (Prev. Close : 823) Chart 15 : IPCALAB - Weekly (Prev. Close : 676) A range breakout with a close above the Bollinger band on the daily chart indicates fresh upside momentum. (Bullish) A major breakout with a close above the Bollinger band on the weekly chart indicates fresh upside momentum. (Bullish) Chart 16 : FSL - Weekly (Prev. Close : 52) Chart 17 : BAJAJAUTO - Weekly (Prev. Close : 3005) A major breakout with a close above the Bollinger band on the weekly chart indicates fresh upside momentum. (Bullish) A close below Bollinger band and at breakdown point on weekly chart indicates fresh downside. (Bearish) Bollinger Band contraction represents period of low volatility and may be considered by traders for a potential sign of future increased volatility and possible trading opportunities. Thus, in the above examples we have shared few stocks which underwent a breakout / breakdown from the Bollinger band that indicating further acceleration in the on-going trend. IndiaNivesh Securities Ltd 23rd Feb 2018 4 of 11
The Averages An exponential moving average (EMA) is a variant of moving average which is similar to a simple moving average, apart from the weightage as more weight is given to the recent closing prices. We have added 50, 100 and 200 DEMA to our analysis which represents shortterm, medium term and long term trend respectively. As short term traders can use 50 DEMA swing trading decisions, while 100 DEMA can be used by medium term. The long-term investors will focus on 200 DEMA and could consider the same for accumulation & distribution of their investments. The Daily Exponential Moving Average (DEMA) is suited for trending market however it could possibly witness multiple cross over in sideways trend. When the market is trending and in oscillation mode as well has sustained trending nature, the DEMA will also show a similar oscillation & vice-versa. However to limit the multiple whipsaws to a certain extent, the stocks mentioned in the table have closed 1% above or below the respective moving averages. Going ahead, these averages can act as initial filter to on-going trend, or could possibly consider as support & resistance. IndiaNivesh Securities Ltd 23rd Feb 2018 5 of 11
Nifty 50 Overbought / Oversold Stocks above 70 & below 30 Relative Strength Index RSI- The above shown chart represents the comparison of price action of benchmark index Nifty vis a vis the overbought/ oversold zone of Nifty 50 stocks considering the value of daily RSI. The Overbought zone occurs when the RSI value crosses 70 levels while the oversold zone occurs when it plunges below 30 levels. As per last three years data, we can analyse that, whenever the number of overbought stocks in Nifty 50 goes above 13 the market tend to make an intermediate top, while oversold position occurs when number of oversold stocks of Nifty 50 goes above 13 the market tend to form intermediate bottom. During the previous weeks the overbought number of stocks in Nifty reached 13 and in line with our view we witness massive selling in the markets. w the numbers have stabilized. IndiaNivesh Securities Ltd 23rd Feb 2018 6 of 11
Stock of the Week BUY Prev. Close 1300 Chart 14: DMART Daily Chart Target 1550 Stop Loss 1160 52 Weeks High 1306 52 Weeks Low 558 50 EMA 1173 100 EMA 1134 200 EMA 1040 Stock Outlook The stocks has confirmed a range breakout on the daily chart at it all time high which suggests fresh rally going ahead. During the process, the stock also managed to close well above the upper Bollinger Band which adds more strength to the momentum. Even the daily RSI indicator is on the verge of a breakout as shown in the inset. Thus, we recommend buying the stock in the range 1280-1260 with a stop loss of 1160 for the target of 1490 / 1550. IndiaNivesh Securities Ltd 23rd Feb 2018 7 of 11
Weekly Derivatives Analysis Open Interest Shockers Nifty Option Snapshot The March series started on an optimistic note and hence we observed heavy built up in 10300 10400 strikes puts. At the same time long built-up was seen in 10500-10600 strikes call. As of now the OI concentration is at 10400 puts to the tune of 3 million shares and 10700 calls to the tune of 3 million shares. This indicates a range of 10400 10700 for the coming week. IndiaNivesh Securities Ltd 23rd Feb 2018 8 of 11
Weekly Pulse MIS IndiaNivesh Securities Ltd 23rd Feb 2018 9 of 11
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