Tuesday’s trade favoured a sideways move with no clear direction visible and incidentally, the sharp plunge served only to wipe off the gains of the first half ensuring a smaller candle than the previous day, Anand James, Chief Market Strategist, Geojit Financial Service said. This points to indecisiveness, and not as much of a directional bias that the plunge would have us believe, he said, adding that this calls for a swing higher again towards 21,630, if the 20-day SMA at 21,484 holds. A breach could lead to declines up to 20,900s in his view.
We spoke to analysts on how one should trade stocks that were in focus in the previous trading sessions based on derivative and technical data:
Analyst: Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research, SBI Securities told this to ETMarkets
Siemens India gives trendline breakout
The stock of Siemens India has given 11-days consolidation breakout on daily scale. This breakout was accompanied by strong trading volume, surpassing the 50-day average volume. Furthermore, on the breakout day, the stock displayed a significant bullish candle, reinforcing the strength of the upward movement.
Currently, the stock is positioned above both its short and long-term moving averages. These averages are on an upward trajectory and align in the preferred sequence, indicating a robust trend. The daily Relative Strength Index (RSI) has established a solid foundation around the 60-59 zone, experiencing a notable rebound. Additionally, the trend strength indicator, ADX, stands at 36, positioned above both the positive (+DI) and negative (-DI) directional indicators. This configuration underscores the stock’s considerable trend strength.
On the derivative front, the January series future has surged by over 4%. The cumulative OI of current, next and far series has dipped by nearly 1%, which clearly indicates overall short covering rally. A significant concentration of CALL open interest is evident at the 4300 strike, while substantial open interest on the PUT side is concentrated at the 4000 strike. Delving into the option chain, there has been a discernible accumulation of long positions from 4150 to 4300 CALL strikes. Conversely, on the PUT side, there is noteworthy PUT writing observed from 4200 to 4100 strikes. This indicates bullish momentum in the stock.A confluence of positive technical and derivative factors suggests a favourable scenario for the bulls. Hence, we recommend accumulating the stock in the zone of Rs 4200-4160 level with the stop loss of Rs 4050 level. On the upside, it is likely to test the level of Rs 4390, followed by Rs 4500 in the short-term.
F&O data suggest short build up in SRF
During Tuesday’s trading session, the stock of SRF witnessed a significant breakdown as it breached the support of an upward-sloping trendline, which had been established by connecting the swing lows since November 2023. Compounding the bearish outlook, the daily chart displayed the formation of a Three Black Crows candlestick pattern, intensifying the downward momentum in the stock.
Additionally, the stock has tumbled below its 100 and 200-day EMA level. The 20, 50 and 100-day EMA has started edging lower. The rising slope of the 200-day EMA has slowed down significantly, which is a bearish sign. Talking about momentum indicators, the daily RSI has tumbled below 40 mark for the first time after October 2023 and it is in falling mode. The MACD histogram is suggesting pickup in downside momentum.
The derivative data paints a clear picture of significant short build up, as evidenced by a 3.49% decline in the January series future. In tandem, there has been a noteworthy 11.68% upswing in the cumulative Open Interest (OI) across the current, next, and far series. This data collectively indicates a robust build-up of short positions in the stock.
There is a notable concentration of CALL open interest at the 2400 strike, followed by the 2500 strike. While significant open interest on the PUT side is observed at the 2300 strike. Talking about option chains, from 2300 to 2500 CE strikes have witnessed CALL writing. While, on the PUT side, from 2300 to 2240 strikes have witnessed PUT buying. This indicates bullish momentum in stock.
Considering the aforementioned observations, we anticipate the stock to sustain its downward trajectory, potentially reaching levels of Rs 2200 and subsequently Rs 2140 in the short to medium term. It is advisable to maintain a stop loss at Rs 2380 on a closing basis.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
