Document 6572578

Technical Picks | October 18, 2014
7700 - A sheet anchor for the bulls
Sensex (26109) / Nifty (7780)
Trading on Monday began with a downside gap over the
previous week's closing at the backdrop of negative cues from
the global bourses. As a result, the Nifty breached the 7800
mark on the lower side in initial trades. However, a strong
buying interest at the day's lows immediately pulled the index
higher and it then went on to close well inside the positive
territory. This was followed by a gap up opening in the market
on Tuesday, although the gains were short lived. The bourses
were shut on Wednesday on account of state elections in
Maharashtra. On Thursday, we witnessed a massive sell off in
the final hour of trade, which dragged the Nifty a tad below
the 7750 mark. However, on Friday, the Nifty managed to
recover some part of the losses, but eventually closed below
the 7800 mark. On the sectoral front, the Realty, IT, Oil &
Gas and Consumer Durables counters witnessed a sharp
correction; whereas the Banking sector stood firm throughout
the week and became the only sector to close in the positive
territory on a weekly basis. The Nifty ended the week with a
cut of 1.02% 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
25827 / 7718 and 22431 / 6710 levels, respectively.
The '20-day EMA' and the '20-week EMA' are placed at
26742 / 7911 and 25757 / 7697 levels, respectively.
Future outlook
The concluded week's movement can be perfectly described
as a tug of war between the bulls and the bears. In our previous
reports, we have been continuously mentioning about the near
term weakness in the market and the possibility of the Nifty
testing 7750 - 7700 levels. The Nifty met our expected
levels with it posting a low of 7723
7723.85 on Friday. But honestly
speaking, the way the index fell on Thursday was quite
unexpected for us as it suddenly tumbled more than 100 points
during the concluding hour of the day's trade. We are now
observing a cluster of supports around the 7700 mark. Firstly,
the daily '89 EMA' is placed around it, which generally provides
For Private Circulation Only |
Source: Falcon
a strong support. In addition, the daily chart exhibits a 'Falling
Wedge' pattern and the lower end of this pattern is seen around
7720
7720. We maintain our stance that traders with a longer term
perspective should start accumulating stocks with a value buying
proposition. As long as the Nifty remains above the 7700
mark on a closing basis, there is no reason for the bulls to
panic from a near term perspective. This view will be negated
once the index decisively sustains below this level and then the
pessimism in the market may get aggravated. In this scenario,
the possibility of the Nifty testing 7560 - 7540 cannot be
ruled out. On the flipside, the 'Falling Wedge' pattern would
get confirmed once the index manages to give a daily close
above the 7900 mark and as a result, we may see the Nifty
going back towards 7980 - 8050 levels.
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Technical Picks | October 18, 2014
Weekly Pivot Levels For Nifty 50 Stocks
SCRIPS
S2
S1
PIV
OT
PIVO
R1
R2
SENSEX
25,550
25,829
26,190
26,469
26,830
NIFTY
7,606
7,693
7,811
7,897
8,015
15,063
15,496
15,735
16,168
16,407
1,445
BANKNIFTY
1,351
1,379
1,398
1,426
AMBUJACEM
199
203
208
212
217
ASIANPAINT
599
620
642
663
686
ACC
AXISBANK
BAJAJ-AUTO
361
381
393
413
425
2,271
2,322
2,381
2,433
2,492
BANKBARODA
834
853
869
888
905
BHEL
210
218
224
232
238
BPCL
639
653
667
681
696
BHARTIARTL
370
383
393
405
415
CAIRN
261
268
280
288
300
CIPLA
558
577
589
608
620
COALINDIA
322
336
346
360
369
69
90
121
142
172
2,799
2,859
2,927
2,987
3,055
427
437
448
459
470
GRASIM
3,085
3,182
3,315
3,412
3,545
HCLTECH
1,861
DLF
DRREDDY
GAIL
1,319
1,412
1,590
1,683
HDFCBANK
843
864
876
897
909
HDFC
948
973
999
1,024
1,051
3,021
2,653
2,763
2,837
2,947
HINDALCO
127
133
144
150
161
HINDUNILVR
697
712
729
743
760
1,559
HEROMOTOCO
1,410
1,458
1,484
1,532
IDFC
132
136
139
143
146
INDUSINDBK
608
634
651
677
693
4,039
ICICIBANK
3,743
3,798
3,891
3,945
ITC
336
345
352
361
369
JINDALSTEL
135
141
152
159
170
INFY
960
980
1,000
1,021
1,041
LT
1,402
1,428
1,445
1,470
1,488
LUPIN
1,281
1,314
1,340
1,373
1,399
M&M
1,153
1,203
1,261
1,311
1,369
MARUTI
2,855
2,898
2,945
2,989
3,036
NMDC
146
153
157
164
168
NTPC
135
138
140
143
145
KOTAKBANK
ONGC
382
390
400
407
417
POWERGRID
130
132
134
136
139
PNB
868
894
914
940
960
RELIANCE
894
916
947
970
1,001
SSLT
200
216
235
252
271
SBIN
2,379
2,450
2,503
2,574
2,626
770
784
806
820
842
2,215
2,328
2,543
2,657
2,872
449
462
482
495
515
79
82
85
88
91
419
433
450
465
482
TECHM
2,052
2,162
2,277
2,387
2,502
ULTRACEMCO
2,170
2,244
2,371
2,445
2,573
WIPRO
540
553
573
586
606
ZEEL
297
310
321
333
344
SUNPHARMA
TCS
TATAMOTORS
TATAPOWER
TATASTEEL
Technical Research Team
For Private Circulation Only |
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Derivatives Review | October 18, 2014
Don't expect linear move on either side
Nifty spot closed at 7779.70 this week against a close of 7859.95 last week. The Put-Call Ratio has decreased from 0.88 to 0.84
levels and the annualized Cost of Carry is positive at 13.34%
13.34%. The Open Interest of Nifty Futures increased by 3.87%
3.87%.
Put-Call Ratio Analysis
Implied Volatility Analysis
PCR-OI has decreased from 0.88 to 0.84 mainly due to
Implied Volatility (IV) for NIFTY has increased from 13.61%.to
reasonable amount of open interest addition in call options,
15.22%. Historical volatility (HV) of NIFTY is at 16.68% and
7800-8100 call options added significant buildup which is
that for BANKNIFTY is trading at 28.47%. Liquid counters
mostly long positions which got formed in last two trading
having very high HV are DLF, JPASSOCIAT, UNITECH,
sessions. On the other hand in put options we saw open interest
GMRINFRA and JPPOWER. Stocks where HV are on lower
addition in the range of 7300-7600 strike price last week.
side are HINDUNILVR, POWERGRID, DABUR, MARUTI and
Maximum buildup in current series has shifted from 8200 to
KOTAKBANK.
8000 call options & of put options is at 7800 strike price.
Open Interest Analysis
Cost-of-Carry Analysis
Total open interest of market has increased from
Nifty current month futures closed at a premium of 37.35
`1,94,997/- cr. to `2,14,628/- cr. Stock futures open interest
points against the premium of 26.85 points to its spot. Next
has increased from `53,015/- cr. to `54,189/- cr. Large cap
month future is trading with premium of 78.30 points. Liquid
names which added significant positions last week are TCS,
counters where CoC is high are JPPOWER, JPASSOCIAT,
HCLTECH, M&M, HDFC and DLF. On the other hand unwinding
NHPC, HDFCBANK and GMRINFRA. Stocks with negative CoC
was visible in counters like KOTAKBANK, INFY, AXISBANK,
are SAIL, SRTRANSFIN, PETRONET, JUBLFOOD and IDFC.
COALINDIA and PNB.
Derivative Strategy
Scrip : RELIANCE
CMP : ` 943.00
View: Mildly Bearish
Lot Size : 250
Strategy: Ratio Put Spread
Buy/Sell
Qty
Scrip
BUY
250
RELIANCE
940
SELL
500
RELIANCE
920
Strike
Price
Series
Option
Ty p e
Buy/Sell Rate
(`)
OCT
PE
13.00
OCT
PE
6.00
LBEP - `901/901/UBEP - `939/939/Max. Risk: Unlimited
If RELIANCE continues to move below LBEP.
Max. Profit: `4,750/If RELIANCE closes at Rs. 920 on expiry.
NOTE: Profit can be booked before expiry if RELIANCE moves in favorable direction and time value decays.
For Private Circulation Only |
Exercise Date (F & O) :
30th. Oct 2014
Expected Payoff
Closing PPrice
rice
((`
`)
Expected
oss
rofit/Loss
Profit/L
895
(`6.00)
905
`4.00
915
`14.00
925
`14.00
935
`4.00
945
(`1.00)
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Weekly
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