NIFTY Technical Outlook and Stocks to Watch This Week

Gemstone Equity Research
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Institutional Research. Individual Advice Trader’s Weekly Tool Kit
Subscriber’s Copy. Not For Circulation | Jul 26, 2021 Milan Vaishnav, CMT, MSTA
www.EquityResearch.asia Consulting Technical Analyst
SECTION -1: Brief Technical Outlook for NIFTY for Jul 26 thru Jul 30, 2021 and Stocks to watch out
for the coming week
The weekly charts do not present a good picture. The NIFTY has formed a lower top and lower bottom
on the weekly charts; importantly, it is still below the rising trend line support that it has violated in the
previous week. This trend line was a support earlier, now broken, has become a resistance. It begins
from the lows formed in March 2020 and it joins the subsequent higher bottoms. Given the rising na-
ture of this trend line, it will become all the more difficult for the markets to move above it with each
passing week. The volatility remained unchanged; INDIAVIX rose by marginal 0.49% to 11.7600.
A Detailed Technical View and Sectoral Analysis based on Relative Rotation Graph (RRG), can be
found here:
www.EquityResearch.asia 1
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Bajaj Consumer Care Ltd — BAJAJCON
BAJAJCON has been moving in a defined range over the past couple of
Action: BUY weeks. The most recent price action shows that the stock took support at
its 100-DMA which presently stands at 279 and has pulled itself back from
that level. It has managed to cross above the 50-DMA which stands at 289.
Entry Above/ Above
Below: The up move has been seen following a formation of a Doji candle near the
292.00
support area of 100-DMA which shows possibility of a technical pullback.
Target: 305.00 The RSI has marked a new 14-period high which is bullish. It also shows a
mild bullish divergence against the price.
The OBV– On Balance volume has been moving higher which shows vol-
Stop loss: 287.00
ume participation; the volumes have been above the 25-day average on all
up days. Some upward revision of the price within the defined range can-
Previous not be ruled out over the coming days.
Close:
291.00
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The Ramco Cements Ltd — RAMCOCEM
RAMCOCEM tested a classical double top resistance near 1110. It failed to

Action: SELL break above that and following a corrective move, it has slipped below the
breakout point. Few signs have emerged which hint at possible continua-
Entry Above/ Below tion of the corrective move.
Below: 1090.00 The daily MACD has shown a negative crossover. It is now bearish and
trades below the signal line. The RSI has not only slipped below 70 from the
Target: 1050.00 overbought zone, but it continued its slide after making a lower top. It oth-
erwise stays neutral and does not show any divergence against the price.
On the weekly charts, RSI shows a strong bearish divergence against the
Stop loss: 1130.00 price.
The RS line against the broader NIFTY500 Index has also made a lower top
Previous and it is seen inching lower.
Close:
1094.70
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Larsen & Toubro Ltd — LT
LT staged a breakout following a formation of an Ascending Triangle pattern.

Action: SELL However, the up move seem to have halted with a jerk following the for-
mation of a large black body. Although the breakout stays in force, there are
Entry Above/ Below possibility of the stock suffering a full throwback and returning to its
Below: 1610.00 breakout levels of 1560.
The Bollinger bands have gotten wider than usual. This further increases the
Target: 1560.00 possibilities of the stock returning back to its usual volatility band and in the
defined range for some time. The RSI has slipped below 70 from an over-
bought area. Upon subjecting it to a regular pattern analysis, it appears that
Stop loss: 1635.00 the RSI has shown a bearish failure swing. It made a high, slipped, pulled it-
self back but failed to move past the previous high and slipped again. This
resulted in a bearish failure swing.
Previous
Close:
1611.75
Weekly RSI shows a bearish divergence against the price.
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Gujarat State Fertilizers & Chemicals Ltd — GSFC
The most recent price action shows that GSFC has formed a Symmetrical
Action:: BUY Triangle formation. This is otherwise a neutral formation; however, if we
read this along with other pieces of evidence present on the chart, it may
Entry Above/ Above get resolved with an up move in the price over the coming days.
Below: 118.00 The daily MACD has shown a positive crossover; it is now bullish and above
its signal line. RSI is seen breaking out from a sideward move ahead of the
Target: 130.00 price. RSI has also marked a new 14-period high which is bullish; it also
shows a bullish divergence against the price.
Stock has rolled inside the improving quadrant of the RRG. The volumes
Stop loss: 112.00 have been higher and above their 25-day average.
RS line against the broader NIFTY500 index is also seen moving higher.
Previous
Close:
117.85
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Dr Reddy’s Laboratories Ltd — DRREDDY
DRREDDY marked its incremental high near 5600 and after that has seen
Action: BUY some corrective retracement. It has taken support near the small trend line
and has also shown some possibilities of a technical pullback while staying
Entry Above/ Above within the defined range.
Below: 5430.00 An Engulfing Bearish candle has occurred following a downtrend and near
the support area of 50-DMA which presently stands at 5352. A candle with
Target: 5580.00 a long lower shadow occurred after that and it was followed up by an bull-
ish engulfing candle. This has first created a stage for a formation of a likely
support and then some reversal in the price.
Stop loss: 5360.00 RSI is neutral and does not show any divergence against the price. RS line
against the broader NIFTY 500 is seen moving higher and crossing above its
Previous 50-DMA.
Close:
5422.15
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Aarti Industries Ltd — AARTIIND
AARTIIND has been consolidating in a defined range with inherently bullish

Action: BUY undertone; it has shown some signs of breakout our from the present side-
ways consolidation range.
Entry Above/ Above The price has closed above the upper Bollinger band; this further increases
Below: 892.00 the possibility of a meaningful breakout happening.
The daily MACD has shown a positive crossover; it is bullish and trades
Target: 940.00 above the signal line. The RSI has marked a new 14-period high which is
bullish; it also shows a bullish divergence against the price.
The OBV — On Balance Volume has marked a new high ahead of the actual
Stop loss: 874.00
price breakout happening. This is a bullish sign. The RS Line against the
broader Index has changed its trajectory, it is moving higher and crossed
Previous above its 50-DMA.
Close:
891.00
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Section 2—Option Strategies

Hedged Option Strategy—NIFTY
Action Instrument Strike Expiry
BUY NIFTY 15850 PUT 29JUL
SELL NIFTY 15700 PUT 29JUL
Rationale: This strategy is based on the premise the NIFTY will test 15700 levels by
29JUL expiry
Pay / Get Premium: PAY Net Rs. 47.30 = Premium of Rs. 2365
Maximum Profit | Maximum Maximum Profit Rs. 5265 | Maximum Loss Rs. 2365
Loss:
Note: (IMPORTANT: The Option Prices may vary on Monday. The pay-off
chart, Maximum and Minimum Profits may vary. The strategy can be
deployed if the price difference is not exceeding 30%.
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Hedged Option Strategy — DRREDDY
BUY DRREDDY 5500 CALL 26AUG
SELL DRREDDY 5600 CALL 26AUG
Rationale: This strategy is based on the view that DRREDDY may test 2600 levels
before 26AUG expiry
Pay / Get Premium: PAY Net Premium of Rs. 40.95 = Rs. 5119
Loss:
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Hedged Option Strategy— BankNifty
BUY BANKNIFTY 35100 PUT 29JUL
SELL BANKNIFTY 34500 PUT 29JUL
Rationale: This strategy is based on the view if the Banknifty will test 34500 levels
by 29JUL expiry.
Pay / Get Premium: GET Net Premium of Rs. 202.00 = Rs. 5050
Loss:
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Hedged Option Strategy— ASHOKLEY
BUY ASHOKLEY 120 PUT 26AUG
SELL ASHOKLEY 115 PUT 26AUG
Rationale: This strategy is based on the view that ASHOKLEY will test 115 levels before 26AUG expi-
ry
Pay / Get Premium: PAY Net Premium of Rs. 1.40 = Rs. 6300
Maximum Profit | Maximum Loss: Maximum Profit Rs. 16300 | Maximum Loss Rs. 6300
Note (IMPORTANT: The Option Prices may vary on Monday. The pay-off chart, Maximum and
Minimum Profits may vary. The strategy can be deployed if the price difference is not
exceeding 30%.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst

Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. IN-
H000003341) Tel: +91-70164 32277 | www.EquityResearch.asia | milan.vaishnav@equityresearch.asia
& Advisory Services
Disclosures and Disclaimer:

The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on
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are governed as per the Terms of Service on https://equityresearch.asia/terms-of-use
The Research Analyst has not managed or co-managed the issues of any of the companies discussed and has not received any such remuneration from such
activities from the companies discussed.
The Research Analyst has not received any remuneration from the Merchant Banking activities.
The Research Analyst has adopted an independent approach without any conflict from anyone. The Research Analyst has not received any compensation or
other benefits from the companies mentioned in the report or third party in connection with preparation of the research report.
Compensation of the Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
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Gemstone Equity Research

& Advisory Services

Bajaj Consumer Care Ltd — BAJAJCON

The Ramco Cements Ltd — RAMCOCEM

RAMCOCEM tested a classical double top resistance near 1110. It failed to

Larsen & Toubro Ltd — LT

LT staged a breakout following a formation of an Ascending Triangle pattern.

Gujarat State Fertilizers & Chemicals Ltd — GSFC

Dr Reddy’s Laboratories Ltd — DRREDDY

Aarti Industries Ltd — AARTIIND

AARTIIND has been consolidating in a defined range with inherently bullish

Section 2—Option Strategies

Action Instrument Strike Expiry

BUY NIFTY 15850 PUT 29JUL

SELL NIFTY 15700 PUT 29JUL

Hedged Option Strategy — DRREDDY

Action Instrument Strike Expiry

BUY DRREDDY 5500 CALL 26AUG

SELL DRREDDY 5600 CALL 26AUG

Hedged Option Strategy— BankNifty

Action Instrument Strike Expiry

BUY BANKNIFTY 35100 PUT 29JUL

SELL BANKNIFTY 34500 PUT 29JUL

Hedged Option Strategy— ASHOKLEY

Action Instrument Strike Expiry

BUY ASHOKLEY 120 PUT 26AUG

SELL ASHOKLEY 115 PUT 26AUG

Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst

Disclosures and Disclaimer:

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