Technicals
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Indian benchmark indices are off their provisional highs amid dicey outcome of the Karnataka polls. Taking advantage of the BJP falling short of majority,, the Congress joined hands with the JD(S) to stake a claim to form the government in order to foil BJP's chances. However, the Karnataka Governor invited BJP to form the government and has been given 15 days to prove its majority. Hence, the markets are likely to remain volatile during the next two weeks. Nifty had started off with a retreat on the results day and the market mood has turned pessimistic for now. Earlier, Nifty had given a downward sloping trendline breakout near 10735 on May 11 but witnessed a pullback, where Nifty hit below its trendline level. The fall was supported by good volumes and 14-period RSI negative crossover.
The broader markets have underperformed the benchmark indices with Mid-cap and Small-cap indices shedding 1.3% and 1.6%, respectively. During the period, the defensive sectors of FMCG and IT cushioned the markets and saved the markets from a sharp downslide. Both the sectors surged more than 1%. The power sector remained weak, posting a loss of 1.1%.
Going forward, if Nifty falls below the levels of 10660-10630, we hold 10605-10555 and 10440 as our successive supports. It was a third consecutive day of the fall and if Nifty bounces back and retests the trendline at 10715, we hold 10765-10795 followed by 10830-10850 as the resistance levels.
NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for the market’s short-term expectation of volatility, dipped 0.30 per cent and settled around 13.40. Nifty May 2018 futures closed at 10693 at a premium of 10.30 points over spot closing of 10682.70. Nifty June 2018 futures closed at 10703 at a premium of 20.30 points over spot closing of 10682.70. The Nifty Put-Call Ratio (PCR) Open Interest wise stood at 1.17 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
BAJAJ FINSERV ................ BUY ............... CMP Rs 5566
BSE Code ...... 532978
Target 1 .... Rs 5850
Target 2 .... Rs 6000
Stoploss ... Rs 5200(CLS)
✓ Current Observation: The stock, after registering a swing high of Rs 5534.90 on April 30, 2018, entered into a corrective phase. The stock made the low of Rs 5225 and it took the stock about 7-8 trading sessions for this fall, but it managed to retrace the entire downmove in about five trading sessions.
✓ 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 50-day EMAs, which is positive for the stock.
✓ The 14-period RSI on the daily time frame has witnessed trendline breakout and is on a rising trajectory.
✓ The level of Rs 5200 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 5850-6000.
✓ Conclusion: Considering the breakout of the downward sloping trendline and the stock trading above its important short term moving averages, we recommend buying this stock for a target price of Rs 5850-6000, with a stop loss at the level of Rs 5200
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Saregama Ltd at Rs 782.35 in issue no. 30 (dated May 14, 2018). The stock price moved in line with our expectation, despite sell-off in the broader markets. We had recommended our readers to book profit in the stock at Rs 822 on May 14, 2018, through our SMS service. We hope all our readers have benefited from this recommendation.