Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: Indian benchmark indices have exceeded their multiple resistances and the trend reversal levels, but the bulls are struggling to surge further. The cautiousness ahead of the Karnataka election results has resulted in consolidation at the resistance levels. The corporate earnings have been majorly priced in and thereby the stocks have either seen recovery after a sharp sell-off or profit-booking after a good rally. This has brought in some intra-day volatility, but the markets still lacked momentum and have stayed calm during the period.

The broader markets underperformed the benchmark indices, where the Mid-cap and Small-cap indices shed 1% and 0.7%, respectively. The banking index posted recovery and gained 2.5%, while the IT stocks witnessed profit-booking, with the index losing 2.4%. Most other indices closed in the red.

Nifty is trailing above its multiple resistance zone of 10630-10640. It hit 10785 level for the second time on May 10, but it could not sustain and retreated . Above the said levels, we hold 10910 as our next resistance level, which would be followed by 11000 and the all-time high. On the other hand, if Nifty sees any downside below 10630-10600, we hold 10530-10515 followed by 10470-10370 as the support levels.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for the market's short term expectation of volatility, gained 1.05 per cent and settled at 14.42. Nifty May 2018 futures closed at 10725.15 at a premium of 8.6 points over spot closing of 10716.55. Nifty June 2018 futures closed at 10730.85 at a premium of 14.3 points over spot closing of 10716.55. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.10 for May month contract.

Among Nifty Calls, 10,800 Strike Price from the May month expiry was the most active Call. Among Nifty Puts, 10,700 Strike Price from the May month expiry was the most active Put. The maximum OI outstanding for Calls was at 11,000 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

SAREGAMA INDIA .............. BUY ............... CMP Rs.782

BSE Code: 532163
Target 1: Rs.855 Target 2: Rs.870
Stoploss: Rs.720 (CLS)



Current Observation: The stock, after registering a high of Rs 960 in November 2017, entered into a correction phase and formed a series of lower highs and lower lows. Thereafter, the stock formed a strong base around Rs 642-645.

At present, the stock has witnessed breakout of its downward sloping trendline along with robust volumes.

The stock is trading above its 21-day and 34-day EMAs, which is positive for the stock.

The 14-period RSI on the daily time frame crossed the 60-mark and is on a rising trajectory.

The level of Rs 720 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 855-870.

Conclusion: Considering the breakout of downward sloping trendline and the RSI quoting above the 60 level on the daily time frame, we recommend buying this stock for a target price of Rs 855-870, with a stop loss at the level of Rs 720.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Ujjivan Financial Services Ltd at Rs 421.10 in issue no. 29 (dated May 07, 2018). Post our recommendation, the stock failed to move higher and witnessed fierce sell-off. However, it did not breach our stop loss level.

We would advise our readers to exit this stock as the prospects do not look appealing and it seems the breakout had failed.