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Last Updated : Jul 13, 2020 08:57 AM IST | Source: Moneycontrol.com

Deploy Bull Call Ladder spread as Nifty likely to trade in a range: Rajesh Palviya

The Nifty is trading above 20 and 50-Day SMA's which important short-term moving average, indicating a positive bias in the short-term.

 
 
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Nifty is expected to remain in an uptrend to sideways zone until it breaks 10,200 on the downside. For the week, we expect Nifty to trade in the range of 11,000-10,400 with mixed bias, Rajesh Palviya, Head - Technical and Derivative Research, Axis Securities, said in an interview with Moneycontrol’s Kshitij Anand.

edited excerpts:

Q) What led to the price action on D-Street in the week gone by?

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A) The market extended gains to the fourth consecutive week in a row. The mood remained buoyant as the global market also remained positive. Investors focused on the prospect of economic recovery and progress on the potential of coronavirus vaccine.

India-China positive talks regarding the border dispute also added to the confidence on the Street.

The Nifty started the week on a positive note and consolidated within the range of 10,650-10,850 throughout the week, indicating lack of strength on either side.

The Nifty50 closed at 10,768 with a gain of 161 points on a weekly basis. Midcap and smallcap index also added to the gains on a week-on-week basis and the market breadth remained on the positive side.

Reliance and BP joint venture announcement also added to the positive sentiment. The stock (RIL) jumped by about 3 percent on Friday.

As the earnings season kicked, TCS delivered numbers that were reasonably in line with expectation and the management also looked confident about growth for the next quarter onwards.

Q) What is the outlook for Nifty in the coming week? And, what are the important levels to watch out for?

A) On the weekly chart, the index has formed a long bullish candle forming a higher High-low compared to the previous week and has closed above the previous week's high, indicating a positive bias.

The index has been consolidating within a rising “Symmetrical Triangle”, indicating a lack of confidence on either side.

The index continues to move in a Higher Top and Higher Bottom formation on the daily chart indicating a positive bias.

The chart pattern suggests that if Nifty crosses and sustains above 10850 levels, it would witness buying that could take the index towards 11000-11200 levels.

However, if the index breaks below 10,650 levels, it would witness selling which would take the index towards 10,400- 10,300.

The Nifty is trading above 20 and 50-Day SMA's which important short-term moving average, indicating a positive bias in the short-term.

The Nifty is expected to remain in an uptrend to sideways zone until it breaks 10,200 on the downside. For the week, we expect Nifty to trade in the range of 11,000-10,400 with mixed bias.

The weekly strength indicator RSI and the momentum oscillator Stochastic both are moving upwards and is quoting above its reference line indicating positive bias.

Q) Any particular strategy which traders could execute for the week?

A) The strategy which we are suggesting for the week is a Bullish strategy namely CALL LADDER, that involves buying of one lot of Nifty 10,800Call @199, and selling of one lot each of 11,000 Call @ 111 & one lot of 11,200 Call @ 54.

All the options have monthly expiry of 30th June 2020. We have observed that the highest OI concentration on the call side prevails in the above-mentioned strike price indicating a probable resistance zone & to take the advantage of the same at low cost we are suggesting this strategy.

The maximum profit of Rs 12,500 will be attained at 11,200 levels, while the strategy will start making losses above 11,350.

The cost of the strategy involves an outflow of Rs 2,500 which is the maximum loss if Nifty trades & remains below 10,800 levels, however, above 11,350, its advisable to exit the strategy in total to avoid ‘unlimited’ losses.

The break-even points of the strategy are 11,367 on the upside, and 10,833 on the downside.

Q) Any top 3-5 stocks which investors can bet on in the coming week? Please give a small rationale with target and stop-loss?

A) Here is a list of 3 stocks which could give 7-12% return in the next 3-4 weeks:

Alkem Laboratories Ltd: LTP: Rs 2,421 | Buy Range: 2,410-2,360 | Stop Loss: Rs 2,340 | Target: Rs 2,500-2,585 | Upside 7%

The stock has decisively broken out from a “Symmetrical Triangle” indicating a stronger comeback by the bulls.

The daily strength indicator RSI has started rising from the mid-point and stochastic has given a bullish crossover indicating bullish momentum. Good volume activity is observed this week indicating the strong interest of the bulls.

Century Plyboards (India) Ltd: LTP: Rs 132.50 | Buy Range: Rs 131-128 | Stop Loss: Rs 124 | Target: Rs 142-149 | Upside 12.45%

The stock has broken out from a “Rounding Bottom” formation, indicating increased participation by the bulls.

The weekly strength indicator RSI continues to maintain its bullish momentum, indicating a sustained uptrend.

Stochastic has given a bullish crossover on the weekly timeframe indicating bulls are in control. The stock is trading above all the major moving averages (20, 50 & 100 SMA) indicating a sustained uptrend.

Metropolis Healthcare Ltd: LTP: Rs 1,480.50 | Buy Range: 1,499-1,469 | Stop Loss: Rs 1,420 | Target: Rs 1,610 – 1,635 | Upside 10%

The stock has broken out from a “Cup & Handle” formation on the daily chart, indicating that the bulls have started showing interest at lower levels.

Both the weekly strength indicator RSI and momentum oscillator stochastic continue to trend higher, indicating that the bullish momentum is intact.

The stock is trading above all major moving averages (20 & 50 – day SMA) indicating a sustained uptrend.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Jul 13, 2020 08:57 am
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