Technicals
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY :
Indian benchmark indices bounced back from their major support levels and are consistently surging northwards with baby steps. For now, both Nifty and Sensex have taken a breather at the higher levels with no immediate trigger for any move on the either side. The breather in the form of consolidation for three days was followed by rally in the Nifty for nine consecutive days. The broader markets outperformed the benchmark indices, where both mid-cap and small-cap indices surged more than one per cent. On the sectoral front, metals saw a good comeback and surged 6 per cent, while realty and FMCG followed with 4.7 per cent and 3.9 per cent gains, respectively. Bankex and auto remained flat to weak.
As mentioned earlier, we maintain our major resistance at 10630, which is a multiple resistance and earlier trend reversal level. Nifty may see a straight upside or retreat for a pull back. In case of a straight upside after 10630, we hold 10705-10735 as the next resistance levels, followed by 10830. However, if the markets retreat for a pullback, then we may see Nifty taking supports at 10495-10440, followed by 10355.
NIFTY DERIVATIVES:
The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, slipped 2.62 per cent and reached 13.74. Nifty April 2018 futures closed at 10579.15 at a premium of 13.85 points over the closing of 10565.30. Nifty May 2018 futures closed at 10608.15 at a premium of 42.85 points over the spot closing of 10565.30. The Nifty Put-Call Ratio (PCR) Open Interestwise stood at 1.42 for April month contract.
Among Nifty Calls, Strike Price of 10,600 from the April month expiry was the most active Call. Among Nifty Puts, 10,500 Strike Price from the April month expiry was the most active Put. The maximum OI outstanding for Calls was at 10,700 strike price and that for Puts it was at 10,500 strike price.
LEGEND
EMA – Exponential Moving Average.
MACD – Moving Average Convergence Divergence
RSI – Relative Strength Index
STOCK STRATEGY
COFFEE DAY ENTERPRISES .......... BUY ............ CMP Rs 311.80
BSE Code ...... 539436
Target 1 .... Rs 335
Target 2 .... Rs 343
Stoploss ... Rs 287(CLS)
✓ Current Observation: The stock recently broke out of the symmetric triangle pattern at Rs 306 with volume spurt.
✓ The correction halted near about its 100-day EMA level at the multiple support range of Rs 275-285.
✓ The stock also gave a consolidation breakout at Rs 313 and Rs 317 levels, but resisted at Rs 327 level, which is its upward trendline resistance level. It witnessed a pullback on April 19.
✓ The 14-period RSI on the daily time frame is on a rising trajectory and has moved above its 9-day average. It has broken its downward sloping trendline at 51 and is quoting at 58, suggesting momentum. The level of Rs 287 is likely to act as a strong support and this could be maintained as a stop loss for long positions. On the upside, the stock is likely to touch the levels of Rs 335-343
✓ Conclusion: Considering the symmetric triangle breakout with volume spurt and the 14-period RSI quoting above 55, we recommend buying this stock for the target price of Rs 335-343, with stop loss at the level of Rs 287.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of ITI Ltd at Rs 131.60 in issue no. 26 (dated April 16, 2018). Post our recommendation, the stock has been witnessing consolidation. The stock is still trading above its downward sloping trendline level and above its 100 day EMA level. The technical parameters of the stock still look promising. We would advise our readers to hold this stock with a stop loss of Rs 122, as the stock is likely to move higher from the current levels