Technical Picks | May 25, 2013

Bulls in complete disarray

Sensex (19704) / Nifty (5984)
The week began on a flat note in-line with quiet trading mood across the globe. Indices then continued with their existing up trend and surged nearly a percent in first half of Monday. However, post mid-session; we witnessed massive selling pressure in some of the heavyweights. As the week progressed, indices continued to show weakness mainly on account of negative developments in Japanese markets coupled with lowerthan-expected earnings by index heavyweights such as SBI and L&T. Also, significant depreciation of the Rupee fueled pessimism amongst market participants. On Friday, indices recovered from the initial losses to end the session with very minor gains. During the week, four out of five trading sessions ended on a losing side. As a result, indices sneaked below last week's low of 19652 / 5970; 5970 but eventually managed to close marginally above it. The correction was mainly led by the Realty, Capital Goods, Oil & gas and Banking counters; whereas the IT and FMCG sectors remained subdued throughout the week. The Sensex and the Nifty shed 2.87% and 3.29%, respectively, over the previous week's closing.
Source: Falcon

Exhibit 1: Nifty weekly chart

Exhibit 2: Nifty Daily chart

Pattern Formations

Source: Falcon

The '20-week EMA' and the '20-day EMA' are placed at 19331/ 5863 and 19804/ 6017 levels, respectively. The '89-day EMA' and the '200-day SMA' are placed at 19369/ 5873 and 18983 / 5757 5757, respectively. The weekly 'RSI' momentum oscillator and the daily ADX (9) indicator are negatively poised. We are observing a 'Bearish Engulfing' Japanese candlestick pattern on weekly chart.

the wrong foot. The fall in the market in the last week has negated the bullish implication of 'V' pattern mentioned in our earlier report. The weekly chart now depicts a 'Bearish Engulfing' Japanese candlestick pattern. An occurrence of such pattern near a significant resistance level indicates the probable completion of an existing uptrend and signals possibility of near term slowdown. In addition, the daily 'ADX (9)' indicator and weekly 'RSI' momentum oscillator are negatively poised. The said will be confirmed ONLY if indices sustain below this week's 5936 In this scenario, indices may move lower low of 19568 / 5936. to test 19360 - 19022 / 5850 - 5764 levels. On the flipside, 19833 - 20028 / 6015 - 6082 levels would act resistance for our benchmark indices. The 'Bearish Engulfing' pattern would be negated only above the high of 20444 / 6230 6230. Considering that the derivative expiry session in the coming week, we expect volatility to increase and advise traders to remain light on positions and trade with strict stop losses.

Future Outlook
Finally, our benchmark indices have broken their winning streak in the sixth week. During the opening session of the week, indices moved in the direction of the 127% Fibonacci Retracement level 5477 This level of the fall from 20204 / 6112 and 18144 / 5477. was placed at 20750 / 6280 6280. However, very surprisingly, indices took a u-turn half way through after posting a high of 20444 / 6230 and most traders, including us, were caught on

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Technical Picks | May 25, 2013

Weekly Pivot Levels For Nifty 50 Stocks

SCRIPS
SENSEX NIFTY BANKNIFTY ACC AMBUJACEM ASIANPAINT AXISBANK BAJAJ-AUTO BANKBARODA BHARTIARTL BHEL BPCL CAIRN CIPLA COALINDIA DLF DRREDDY GAIL GRASIM HCLTECH HDFC HDFCBANK HEROMOTOCO HINDALCO HINDUNILVR ICICIBANK IDFC INDUSINDBK INFY ITC JINDALSTEL JPASSOCIAT KOTAKBANK LT LUPIN M&M MARUTI NMDC NTPC ONGC PNB POWERGRID RANBAXY RELIANCE RELINFRA SBIN SESAGOA SUNPHARMA TATAMOTORS TATAPOWER TATASTEEL TCS ULTRACEMCO R2 20,781 6,343 13,754 1,319 197 4,921 1,597 1,928 792 329 215 438 317 435 323 274 2,150 351 3,265 770 931 736 1,748 116 593 1,275 171 536 2,471 347 327 91 823 1,752 840 1,057 1,870 128 166 354 888 119 504 883 465 2,595 175 1,039 329 99 334 1,552 2,131 R1 20,242 6,163 13,262 1,273 191 4,863 1,529 1,866 742 314 204 410 300 422 316 243 2,108 337 3,113 754 918 719 1,691 111 589 1,239 163 517 2,409 338 311 79 802 1,604 805 1,013 1,773 122 158 339 838 114 447 835 420 2,373 168 1,004 309 95 323 1,511 2,038 PIV OT PIVO 19,905 6,050 12,922 1,232 187 4,793 1,482 1,827 710 304 197 392 288 414 308 224 2,061 328 3,007 737 904 707 1,653 108 587 1,201 157 501 2,372 334 300 72 777 1,505 774 981 1,679 119 153 328 802 111 416 807 393 2,250 161 981 296 91 309 1,486 1,976 S1 19,367 5,870 12,430 1,186 181 4,735 1,415 1,765 660 289 186 364 271 401 302 193 2,019 313 2,854 721 892 689 1,595 104 584 1,166 149 482 2,310 325 284 61 756 1,357 739 937 1,582 113 145 314 752 106 359 759 348 2,028 154 946 275 87 299 1,445 1,882 S2 19,030 5,757 12,090 1,145 176 4,666 1,368 1,726 628 279 179 345 259 393 294 175 1,972 304 2,749 704 878 677 1,557 100 581 1,127 143 466 2,273 320 273 54 732 1,258 708 906 1,488 109 140 303 717 103 327 731 321 1,906 147 924 262 83 285 1,420 1,820

Technical Research Team

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Derivatives Review | May 25, 2013

Correction due to long unwinding; don't panic

Nifty spot closed at 5983.55 this week, against a close of 6187.30 last week. The Put-Call Ratio has decreased from 1.26 to 1.12 levels and the annualized Cost of Carry is positive 1.88% 1.88%. The Open Interest of Nifty Futures decreased by 1.11% 1.11%.

Put-Call Ratio Analysis

PCR-OI has decreased from 1.26 to 1.12 levels. The sharp fall in ratio was mainly due to good amount of buildup seen in 5900-6100 call option and simultaneously 6000-6200 put option has seen significant amount of unwinding which was much of short covering. Of late 5700 and 5900 put option has also started seeing buildup in open interest on week on week basis. Highest buildup in open interest for this series is in 6100 call option and 5900 put option.

Implied Volatility Analysis

Implied Volatility (IV) for NIFTY has decreased a bit from 15.33% to 15.28%. Historical volatility (HV) is at 20.83% and that for BANKNIFTY is trading at 30.18%. Liquid counters having very high HV are HDIL, UNITECH, ADANIPOWER, IVRCLINFRA and RCOM. Stocks where HV are on lower side are PETRONET, TATACHEM, BIOCON, ASIANPAINTS and TCS.

Open Interest Analysis

Total open interest of market has increased from `1,68,904/cr. to `1,69,654/- cr. Stock futures open interest has decreased from `33,984/- cr. to `33,662/- cr. Some of the big names which added open interest are WIPRO, RANBAXY, JPASSOCIAT, SBIN, TCS and MARUTI. Open interest was shed in large cap names like ICICIBANK, COALINDIA, PNB, AMBUJACEM and IDFC.

Cost-of-Carry Analysis
Nifty futures closed at a premium of 1.85 points against the premium of 8.80 points to its spot. Next month future is trading with premium of 15.65 points. Liquid counters where CoC is high are BHARTIARTL, RENUKA, INDCEM, JPPOWER and SUNPHARMA. Stocks with negative CoC are ICICIBANK, SBIN, INFY, GMRINFRA and HAVELLS.

Derivative Strategy
Scrip : BANKNIFTY View: Mildly Bullish Buy/Sell BUY
BEP - 12880

CMP : 12706.60

Lot Size : 25

Exercise Date (F & O) : 30th May 2013 Expected Payoff

Strategy: Long Call Scrip BANKNIFTY Strike Price 12800 Series MAY Option Type CE Buy/Sell Rate (`) 80.00

Qty 25

Closing P rice Price (`)

Expected Profit/L oss rofit/Loss

12600 12700 12800

(`80.00) (`80.00) (`80.00) `20.00 `120.00 `220.00

Max. Risk: `2000/If BANKNIFTY closes below 12800 on expiry.

Max. P rofit: Unlimited Profit:

If BANKNIFTY continues to move above BEP .

12900 13000

NO TE : Profit can be booked before expiry if BANKNIFTY moves in favorable direction. NOTE TE:

13100

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Ratings (Returns) :

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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