Technical Picks | January 10, 2015
Don't get carried away by the bounce
Sensex (27458) / Nifty (8285)
On Monday, the Nifty finally snapped a six-day rally as modest
profit booking / weakness was witnessed in some of the index
heavyweights. But on Tuesday, the Nifty witnessed a massive
gap down opening on the back of extremely negative global
cues. In fact, the pessimism reinforced as the day progressed
and eventually, the Nifty closed with a mammoth cut of three
percent. This was followed by another weak session on
Wednesday, but the Nifty managed to restrict its downfall above
the 8100 mark on a closing basis. The final two sessions of the
week traded with strong optimism as there was a smart recovery
across the globe. On the sectoral front, the IT and FMCG stocks
managed to close in the green, while the weakness during the
week was mainly propelled by Metal, Banking, Capital Goods
and Power counters. The Nifty ended the week with a loss of
1.32% over the previous week's closing.
Exhibit 1: Nifty Weekly chart
Source: Falcon
Exhibit 2: Nifty Daily chart
Pattern formation:

The '89-day EMA' and the '89-week EMA' are placed at
27127 / 8133 and 23696 / 7093 levels, respectively.

The '20-day EMA' and the '20-week EMA' are placed at
27452 / 8261 and 27153 / 8142 levels, respectively.
Future outlook
Source: Falcon
A sharp recovery during the previous week was followed by a
quiet session on Monday. In-line with our expectation, the Nifty
faced stiff resistance around the 78.60% Fibonacci retracement
level (of the recent fall) placed at 8460
8460. As a result, we witnessed
a bit of a cautious approach from the bulls and hence, the
Nifty corrected marginally after posting a high of 8445.60
8445.60. In
our earlier report, we had clearly stated that we were skeptical
on the up move seen in the previous week. This cautious stance
on the market played out well for us as the Nifty tumbled by
more than 250 points on Tuesday on worries about the Eurozone
and sinking oil prices. This was the biggest intra-day loss since
September 03, 2013. The selling pressure continued on
Wednesday as well and in the process, the Nifty almost met
our initial target of 8050 (low was 8065.45
8065.45). Following this,
due to easing of global concerns, we witnessed a smart recovery
in the market, leading the Nifty to surge and close a tad below
the 8300 mark. Going forward, despite this sharp bounce in
the market, we maintain our bearish view on the market.
formation of a 'Bearish Engulfing' pattern on the Monthly chart
and the possibility of forming a 'Lower Top' on the weekly chart,
which seems very likely now. This is supported by a breakdown
of the weekly 'RSI-Smoothened' momentum oscillator below the
'Horizontal Line' support level (please refer the exhibit 1). Selling
pressure may resume in the coming week once the Nifty sneaks
below the Friday's low of 8190
8190. In this scenario, we may see an
immediate correction towards the 8065 level, which is the recent
low as well as the strong support zone of the 'Upward Sloping
Trend Line'. The actual pessimism in the market will get
reinforced once the Nifty slides below the 8060 mark and in
this scenario, we expect the Nifty to correct towards
7950 - 7850 levels. Hence, it's advisable for traders to not get
carried away by the current bounce and stay light on positions.
Traders can opt to exit fresh long positions in this up move and
can go short on the market with a proper exit strategy. On the
higher side, 8400 - 8446 levels are seen as immediate
resistance levels. The above mentioned hypothesis will be
negated once the Nifty manages to close above the 8446 mark.
The important hypothesis backing our stance is the same as
mentioned in our previous weekly report. The first is the
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Technical Picks | January 10, 2015
Weekly Pivot Levels For Nifty 50 Stocks
SCRIPS
S2
S1
PIV
OT
PIVO
R1
R2
SENSEX
26,145
26,802
27,433
28,090
28,721
7,885
8,085
8,265
8,465
8,645
17,717
18,177
18,672
19,132
19,626
1,493
NIFTY
BANKNIFTY
1,286
1,338
1,389
1,442
AMBUJACEM
211
219
226
234
241
ASIANPAINT
721
771
800
849
879
ACC
470
486
503
519
537
BAJAJ-AUTO
2,296
2,373
2,427
2,504
2,558
BANKBARODA
1,141
AXISBANK
1,013
1,046
1,077
1,109
BHEL
234
246
262
274
290
BPCL
607
642
665
700
723
BHARTIARTL
341
351
359
369
376
CAIRN
222
232
239
249
255
CIPLA
584
601
621
638
658
COALINDIA
366
373
379
386
393
DLF
DRREDDY
127
135
140
147
152
2,888
2,977
3,099
3,188
3,311
400
415
433
449
466
GRASIM
3,232
3,329
3,438
3,534
3,644
HCLTECH
1,425
1,480
1,547
1,602
1,670
917
941
960
984
1,004
HDFC
1,051
1,087
1,131
1,167
1,211
HEROMOTOCO
3,223
GAIL
HDFCBANK
2,832
2,908
3,028
3,103
HINDALCO
138
146
154
161
169
HINDUNILVR
700
759
814
872
927
ICICIBANK
318
333
350
365
382
IDFC
147
152
157
162
167
INDUSINDBK
INFY
767
783
802
818
838
1,803
1,888
1,999
2,084
2,194
ITC
344
353
362
372
381
JINDALSTEL
140
149
158
167
176
KOTAKBANK
1,178
1,259
1,315
1,396
1,452
LT
1,437
1,473
1,522
1,559
1,608
LUPIN
1,329
1,368
1,405
1,445
1,481
M&M
1,182
1,210
1,229
1,257
1,276
MARUTI
3,320
3,398
3,454
3,531
3,587
NMDC
126
132
140
146
154
NTPC
136
140
143
148
150
ONGC
313
327
343
357
373
POWERGRID
131
135
137
141
144
PNB
187
197
209
219
232
RELIANCE
796
819
855
878
914
SSLT
192
201
213
222
234
SBIN
284
294
306
316
327
782
801
818
837
854
2,291
2,368
2,484
2,560
2,676
472
492
509
529
546
74
77
81
84
87
362
379
400
416
438
TECHM
2,413
2,490
2,590
2,667
2,767
ULTRACEMCO
2,542
2,635
2,705
2,798
2,868
WIPRO
523
534
549
561
576
ZEEL
343
354
368
378
392
SUNPHARMA
TCS
TATAMOTORS
TATAPOWER
TATASTEEL
Technical Research Team
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Derivatives Review | January 10, 2015
Current bounce back is not trend changing
Nifty spot closed at 8395.45 this week against a close of 8395.45 last week. The Put-Call Ratio has increased from 1.11 to 1.10 levels
and the annualized Cost of Carry is positive at 6.83%
6.83%. The Open Interest of Nifty Futures decreased by 18.65%
18.65%.
Put-Call Ratio Analysis
Implied Volatility Analysis
PCR-OI has increased from 1.11 to 1.10 levels mainly due to
Implied Volatility (IV) for NIFTY has increased from 12.34%.to
good amount of open interest addition in call options last week.
13.76%. Historical volatility (HV) of NIFTY is at 20.96% and
We saw huge open interest addition in the range of
that for BANKNIFTY is trading at 25.81%. Liquid counters having
8100-8500 call options. On the other hand in call options
very high HV are HDIL, JPASSOCIAT, HDIL, AMTEKAUTO and
buildup was seen in 7500-8100 put options, we believe these
JINDALSTEL. Stocks where HV are on lower side are UNITECH,
are mostly long positions formed by FIIs. Maximum buildup
JPASSOCIAT, HDIL, JINDALSTEL and AMTEKAUTO.
was seen in 8400 call and 8000 put options.
Open Interest Analysis
Cost-of-Carry Analysis
Total open interest of market has increased from
Nifty current month futures closed at a premium of 31.00 points
`1,82,488/- cr. to `1,99,721/- cr. Stock futures open interest
against the premium of 62.95 points to its spot. Next month
has decreased from `61,302/- cr. to `60,218/- cr. Liquid
future is trading with premium of 81.95 points. Liquid counters
counters names which added significant positions last week
where CoC is high are GMRINFRA, JPPOWER, OFSS, IOB and
are HINDUNILVR, JINDALSTEL, HCLTECH, NMDC and
ADANIPORTS. Stocks with negative CoC are CANBK, SAIL,
DRREDDY. On the other hand unwinding was visible in counters
ASHOKLEY, POWERGRID and COALINDIA.
like ACC, BPCL, AMBUJACEM, HDFC and TECHM.
Derivative Strategy
Scrip : IT
C
ITC
CMP : ``358.80
358.80
View: Range bound but volatile
Buy/Sell
Lot Size : 1000
Strategy: Short Straddle
Expected Payoff
Qty
Scrip
Strike
Price
Series
Option
Type
Buy/Sell Rate
(`)
SELL
1000
ITC
360
JAN
CE
7.50
SELL
1000
ITC
360
JAN
PE
7.50
LBEP - `345.00
UBEP - `375.00
Max. Risk: Unlimited
If ITC continues to move below LBEP or above UBEP.
Max. PProfit:
rofit: `15,000/If ITC closes at Rs. 360/- on expiry.
NO
TE
NOTE
TE:: Profit can be booked before expiry if ITC remains in range and time value decays.
For Private Circulation Only |
Exercise Date (F & O) :
29th. Jan 2015
Closing PPrice
rice
((`
`)
Expected
oss
rofit/Loss
Profit/L
340
(`5.00)
348
`3.00
356
`11.00
364
`11.00
372
`3.00
380
(`5.00)
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