We spoke to Sudeep Shah, Deputy Vice President and Head of Technical and derivatives Research at SBI Securities, on how one should trade stocks that were in focus in the previous trading sessions based on derivative and technical data:
Deepak Nitrite gives trendline breakout
Deepak Nitrite stock has experienced a notable breakthrough, surpassing a horizontal trendline on the daily scale. This breakthrough was not only characterized by a substantial increase in trading volume, indicating strong market participation, but also accompanied by the formation of a sizable bullish candle on the breakout day. This candle adds further confirmation and strength to the breakout, suggesting a potential positive momentum and signalling increased investor interest in the stock.
As the stock is currently trading at a 53-month high all the moving averages and momentum-based setups, are aligning to reflect robust bullish momentum. Across both weekly and daily perspectives, the 14-period Relative Strength Index (RSI) not only positions itself in an extremely bullish zone but also follows an upward trajectory. These synchronized signals not only affirm a prevailing positive trend but also hint at the potential for continued upward movement, portraying an optimistic market sentiment surrounding the stock.
In the realm of derivatives, the future contracts for the December series have witnessed a notable uptick, registering a gain of 3.68 per cent. Furthermore, there has been a substantial increase of 7.19 per cent in the cumulative Open Interest (OI) across the current, next, and far series. This surge in OI strongly suggests a prevalent trend of long build-up, indicating a collective market sentiment favouring long positions across these series. There is a conspicuous accumulation of call open interest at the 2500 strike, closely followed by the 2600 strike. Conversely, substantial open interest on the put side is evident at the 2400 strike. Examining the option chain, there is observable put writing from the 2520 to 2380 strike, signalling a distinct bullish momentum in the stock.
In light of the positive alignment of technical and derivative factors, we propose an accumulation strategy within the Rs 2470-2480 range, incorporating a prudent stop loss at Rs 2390. Short-term projections indicate a potential upward trajectory, with initial targets set at Rs 2600, and subsequent levels at Rs 2660.
Short Covering Amplifies Bullish Momentum in Divi’s Laboratories
On Tuesday, Divi’s Laboratories stock experienced a breakout from a downward-sloping trendline, accompanied by a substantial increase in trading volume. This trendline, established by connecting swing highs since September 2023, was successfully breached, further reinforced by the formation of a significant bullish candle on the breakout day. This candle’s size adds robustness to the breakout, suggesting increased strength and potential positive momentum in the stock.
Currently, the stock is trading above its short and long-term moving averages. These averages are in a rising trajectory and they are in the desired sequence, which suggests the trend is strong. The daily RSI has surged above the 60 mark for the first time after 13 trading sessions. On the daily timeframe, ADX is 18.62 which suggests that the trend is yet to be developed. Directional indicators continue in the ‘buy’ mode as +DI continues above –DI.
The derivative data clearly signals significant short covering, with a 4.48 per cent surge observed in the December series future. Meanwhile, there is a notable 2.40 per cent decline in the cumulative Open Interest (OI) across the current, next, and far series. This data suggests a distinct trend of unwinding short positions, providing insight into a potential shift in sentiment.
There is a notable concentration of call open interest at the 3900 strike, followed by the 4000 strike. While significant open interest on the put side is observed at the 3800 strike. Talking about the option chain, from 4300 to 3900 CE strikes have witnessed a long build-up. While, on the put side, from 3950 to 3600 strikes have witnessed put writing. This indicates bullish momentum in the stock.
Hence, we recommend accumulating the stock in the zone of Rs 3860-3870 with a stop loss of Rs 3740. On the upside, it is likely to test the level of Rs 4060, followed by 4150 in the short term.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)