Technical Picks | August 17, 2013

Crucial support of 5477 in jeopardy

Sensex (18598) / Nifty (5508)
The opening session of the week started off on a higher note in-line with positive global cues. During the initial hour indices pared down their early gains and slipped marginally in the negative territory. However, strong bullish momentum in the second half led to a close with decent gains. Similar price action was seen in the next two consecutive sessions and in the process, the Nifty bounced above the 5720 mark. However, the concluding session turned out to be a nightmare for the bulls. During the day, Nifty opened half a percent lower and nosedived by more than four percent to close marginally above the psychological level of 5500 mark. This was mainly on the back of ongoing weakness in Indian Rupee (INR) and weak global cues. For the week, the Consumer Durable, Capital Goods, Banking and Oil & Gas counters were in strong grip of the bears; whereas the Auto, Healthcare and Metal sectors ended in the positive territory. The Sensex and the Nifty trimmed by 1.02% and 1.04% respectively, over the previous week's closing.
Source: Falcon

Exhibit 1: Nifty weekly chart

Exhibit 2: Nifty Daily chart

Pattern formation:

The '89-day EMA' and the '89-week EMA' are placed at 19384/ 5825 and 18611 / 5620 levels, respectively.
Source: Falcon

The '20-day EMA' and the '20-week EMA' are placed at 19240 / 5721 and 19319 / 5803 5803, respectively. The monthly 'RSI-Smoothened' oscillator is signaling a negative crossover. The weekly 'Lower Top - Lower Bottom' formation in Nifty is still intact. The 50% and 61.8% Fibonacci retracement levels of the rise from 4531 (low of December 2011 candle) to 6230 (high of May 2013 candle) are placed at 5380 and 5180 5180, respectively.

fall of more than four percent for the first time after September 22, 2011. Every attempt by the bulls to recover from the lows got sold into and this single day fall overshadowed the entire bounce seen during the previous four trading sessions. At present, the monthly 'RSI-Smoothened' oscillator is signaling a negative crossover. In addition, the weekly 'Lower Top Lower Bottom' is still intact and indicates further weakness in the near term. Considering all these technical evidences, we are of the opinion that if Nifty stays below the crucial support level of 5477 then we are likely to see a further correction towards 5380 (50% Fibonacci retracement level) and even possibility of testing the 5180 (61.8% Fibonacci retracement level) level cannot be ruled out. We have been mentioning in our previous couple of reports that the overall structure remains negative and we advise positional traders with a 5 to 7 week perspective to adopt a "Sell on Rise" strategy.

Future Outlook
In-line with our expectation, we first witnessed a bounce towards 5720 - 5762 during the first half of the week. This week's high of 5755 precisely coincides with the '20 Day EMA'. This technical tool is considered as a strong resistance and during Friday's session, we witnessed immense selling pressure around '20 Day EMA'. This eventually led to massive intraday

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Technical Picks | August 17, 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 19,782 5,847 10,301 1,216 185 455 1,205 1,993 546 358 131 323 322 436 286 173 2,286 334 2,530 974 825 640 2,097 103 637 937 119 408 3,143 348 247 36 686 831 883 926 1,461 122 152 299 573 102 438 897 382 1,718 145 579 354 81 281 1,900 1,820 R1 19,575 5,682 9,879 1,187 179 436 1,124 1,914 512 345 118 308 311 426 272 160 2,230 317 2,445 948 783 616 2,036 98 619 898 113 379 3,064 334 229 33 660 795 854 883 1,390 115 146 285 534 100 409 865 354 1,649 138 560 334 77 257 1,839 1,768 PIV OT PIVO 19,185 5,589 9,649 1,165 175 425 1,082 1,845 494 338 111 290 302 419 265 147 2,190 307 2,374 926 757 600 1,943 94 607 875 108 364 3,016 326 219 31 643 775 829 856 1,354 109 140 278 513 97 380 841 338 1,601 133 541 305 75 239 1,797 1,697 S1 18,978 5,423 9,228 1,136 169 406 1,002 1,766 460 325 99 274 292 408 252 133 2,134 290 2,289 900 714 576 1,882 89 589 835 102 335 2,937 313 201 28 617 738 800 814 1,283 102 135 263 474 95 351 809 311 1,532 126 522 286 71 215 1,736 1,644 S2 18,589 5,330 8,998 1,114 165 395 960 1,697 441 318 92 257 282 402 244 120 2,094 279 2,218 877 688 560 1,789 85 577 812 98 320 2,889 304 190 26 601 718 775 787 1,247 96 129 256 453 92 322 785 295 1,484 121 503 257 69 196 1,695 1,574

Technical Research Team

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Derivatives Review | August 17, 2013

Dont panic, not many longs in system

Nifty spot closed at 5507.85 this week, against a close of 5565.65 last week. The Put-Call Ratio has increased from 0.95 to 0.98 levels and the annualized Cost of Carry is negative 1.35% 1.35%. The Open Interest of Nifty Futures increased by 15.66% 15.66%.

Put-Call Ratio Analysis

PCR-OI has increased from 0.95 to 0.98 levels. Market corrected significantly this week from its resistance of 5700-5750. In put option significant amount of buildup is seen in 5300-5600 strikes and in call option huge buildup was seen in 5500-5700 strikes. We believe its more of put buying and call writing which has taken place. Also we have observed Fiis significantly buying in index options from beginning of this expiry, they have accumulated lower put strikes. Highest buildup in options is seen in 5600 call strike and 5400 put strikes.

Implied Volatility Analysis

Implied Volatility (IV) for NIFTY has increased from 19.51%.to 22.98%. Historical volatility (HV) is at 28.89% and that for BANKNIFTY is trading at 45.58%. Liquid counters having very high HV are FINANTECH, OPTOCIRCUI, JPPOWER, IRB and HDIL. Stocks where HV are on lower side are OFSS, ACC, CIPLA, TCS and DIVISLAB.

Open Interest Analysis

Total open interest of market has increased from `1,37,296/- cr. to `1,46,979/- cr. Stock futures open interest has decreased from `27,372/- cr. to `26,917/- cr. Some of the large cap which added open interest are RANBAXY, SAIL, GRASIM, M&M and SBIN. Open interest was shed in large cap names like ITC, TATASTEEL, HCLTECH, HINDUNILVR and BPCL.

Cost-of-Carry Analysis
Nifty futures closed at a discount of 2.85 points against the premium of 24.05 points to its spot. Next month future is trading with premium of 29.75 points. Liquid counters where CoC is high are NHPC, HEXAWARE, INDHOTEL, BHEL and SIEMENS. Stocks with negative CoC are IDBI, SAIL, IOC, RENUKA and HDIL.

Derivative Strategy
Scrip : NIFTY View: Range bound with volatility Buy/Sell SELL SELL
LBEP - 5245 HBEP - 5755 Max. Risk: Unlimited
If NIFTY continues to move below LBEP or above HBEP .

CMP : 5507.85

Lot Size : 50

Exercise Date (F & O) : 29th. Aug 2013 Expected Payoff

Closing P rice Price (`) Expected oss rofit/Loss Profit/L

Strategy: Short Strangle Strike Price 5700 5300 Series AUG AUG Option Type CE PE Buy/Sell Rate (`) 23 32

Qty 50 50

Scrip SBIN SBIN

5200 5350 5500

(`45.00) `55.00 `55.00 `55.00 (`45.00) (`195.00)

Max. P rofit: `2750/Profit:

If NIFTY closes on or between two strike prices on expiry.

5650 5800 5950

NO TE : Profit can be booked before expiry if NIFTY remains in the range and time value decays. NOTE TE:

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Weekly

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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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