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Market awaits 1Q results for a decisive move
Sensex (18858) / Nifty (5661)
In our previous Weekly report, we had mentioned that we are
observing a Bullish Inverse "Head and Shoulder" pattern in the
making. The said pattern would be confirmed only if indices
break the downward sloping trend line, joining the two
significant highs of 21109 & 20665 / 6339 & 6181. The value
of the downward sloping trend line is in the range of
19000 - 19155 / 5700 - 5750 levels. The week opened on a
flat note. During the first half of the week, markets traded in a
narrow range. However, volatility increased as the week
progressed and the Sensex ended with marginal gain of 0.51%,
whereas the Nifty ended with net gain of 0.59% vis-à-vis the
previous week.
Pattern Formation
�� On the Weekly chart, a Bullish Inverse "Head and Shoulder"
pattern mentioned in the previous report has not been confirmed
yet. Also, we are observing a "Spinning Top" Japanese
candlestick pattern near the trend line resistance, which suggests
indecisiveness at current levels.
�� On the Weekly chart, markets faced resistance near the
trend line. This level also coincides with the 200 - day SMA
placed near 5750.
�� On the other hand, we are observing a positive crossover
in the "RSI - Smoothened" momentum oscillator on the Weekly
chart, which cannot be ignored.
Future Outlook
Broadly, after a consolidation of three days, markets gave a
sharp upmove on Thursday's trading session, but profit booking
at higher levels led indices to give indecisive closing near the
trend line resistance. Hence, going forward, the previous week
high of 19132 / 5741 level would act as a resistance level for
the markets. If indices manage to close above this level, then
they are likely to test 19652 - 20292 / 5895 - 6092 levels. On
the downside, the previous week low of 18682 / 5610 level
would act as a support level. If indices violate these lows, then
they are likely to test 18527 - 18223 / 5558 - 5468 levels in
the coming trading sessions.
Dip towards 5600 should be bought
Nifty spot closed at 5661 this week, against a close of 5627 last week. The Put-Call Ratio increased from 1.23 to 1.25 points and the
annualized Cost of Carry is positive 3.76%. The Open Interest of Nifty Futures increased by 10.24%.
Put-Call Ratio Analysis Historical Volatility Analysis
The Nifty PCR open interest increased from 1.23 to 1.25 levels.
Over a week, significant build up was observed in most of the
call options however the 5800 call added highest open interest.
While in put options, the 5500 strike added highest open interest
and the strike has highest positions too. The 5800 level continues
to act as a resistance for the market. On the lower side, market
may touch around 5600 levels and the level can be used to
buy selective stocks.
IV of at the money options is at the same levels of 16.80% as of
last week. Historical volatility (HV) has increased from 20.68%
to 20.73%. Counters where HV has increased substantially are
MCDOWELL-N, GODREJIND, TATAGLOBAL, HINDZINC and
SYNDIBANK. Stocks where it has decreased are GTL,
JINDALSAW, PUNJLLOYD, VIDEOIND and GTLINFRA.
Nifty July Futures closed at a premium of 11.65 points against
a premium of 11.20 points last week. The Aug future closed at
a premium of 28.55 points. Few liquid stocks where cost of
carry turned from negative to positive are TCS, ABB,
AMBUJACEM, BRFL and GRASIM. Stocks where cost of carry
turned from positive to negative are ASHOKLEY, INDUSINDBK,
DLF, ACC and IDEA.
Open Interest Analysis
Total Open interest of the market has increased from `97,853
crores to `121,352 crores. Stock futures open interest has
increased from `31,011 crores to `33,617 crores. Few liquid
counters where open interest has increased significantly are
GODREJIND, TATAGLOBAL, CESC, ORIENTBANK and TRIVENI.
Stocks where open interest has decreased significantly are
ORCHIDCHEM, PETRONET, GSPL, CHAMBLFERT and PFC.
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