Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : 

Indian benchmark index Nifty breached its crucial support level in the wake of the not very fruitful OPEC meeting, where the US exhorted India and other countries not to import oil from Iran. Moreover, the expected demand glut in future, with Saudi Arabia being the only leader assuring output now, escalated the oil prices. This, along with trade war concerns, resulted in depreciation of the rupee to its lowest level ever, dragging the markets down. There are no positive triggers to cushion the markets, except for the defensives such as pharma and IT rising on strong dollar.

The OMC stocks dragged benchmarks the most, amid the bounce back in Brent. While benchmark indices shed more than one per cent, the broader markets plunged badly, with the mid-cap and small-cap indices shedding 3.8 and 4.8%, respectively. The realty sector was at the forefront of the downfall, with a loss of 6%, followed by the auto and power sectors with losses of more than 3.5%. Nifty witnessed a symmetric triangle breakdown at 10700 level with reasonable volumes and the 14-period RSI negative crossover. Nifty is heading toward its next crucial support at 10550. Below 10550, we see 10415, followed by 10330, as the next big supports for the Nifty. On the other hand, if Nifty bounces back from 10550 on a weekly closing basis, we hold 10665, followed by 10730, as the resistances for now. A word of caution: the bounce back could be a pullback of the breakdown at 10770.

NIFTY DERIVATIVES: 

The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, went up by 3.18 per cent to 13.94. Nifty July 2018 futures last price stood at 10575 at a discount of 14.1 points over the spot closing of 10589.10. Nifty August 2018 futures last price stood at 10594 at a premium of 4.90 point over the spot closing of 10589.10. The Nifty Put-Call Ratio (PCR) Open Interestwise stood at 1.06 for July month contract. Among Nifty calls, 10,700 Strike Price from the July month expiry was the most active Call. Among Nifty Puts, 10,600 Strike Price from the July month expiry was the most active Put. For the July series, the maximum OI outstanding for Calls was at 10,800 strike price, and that for Puts, it was at 10,600 strike price.

LEGEND : 

EMA – Exponential Moving Average.
MACD – Moving Average Convergence Divergence
RSI – Relative Strength Index

STOCK STRATEGY 

IPCA LABORATORIES......... BUY............ CMP Rs.683.70 

BSE Code ...... 524494
Target 1 .... Rs.730
Target 2 .... Rs.760 
Stoploss ... Rs.625(CLS) 

✓ Current Observation: On the weekly time frame, the stock, after witnessing breakout around levels of Rs 638- 642, entered into an upmove to register a high of Rs 760. However, the stock has witnessed correction from the higher levels, and at present, it has retested the trendline support.

✓ The zone of Rs 630-640 is a key support area as it is the confluence of 50 per cent retracement of the previous upmove (Rs 518-760) and breakout level above February 2016 and April 2017 peak.

✓ The stock is trading above its 200-DMA, which is positive for the stock. The 14-period RSI on the weekly time frame is sustaining above the bull market support reading of 40.

 ✓ The level of Rs 625 is a strong support for the stock and this can be maintained as a stop loss. On the upside, the stock is likely to touch the levels of Rs 730-760.

✓ Conclusion: Considering the re-test of the trendline support and the stock trading above its 200-DMA, we recommend buying this stock for a target price of Rs 730-760, with a stop loss at the level of Rs 625

REVIEW OF STOCK STRATEGY 

We had recommended our readers to buy the stock of Bata India at Rs 834.35 in issue no. 36 (dated June 25, 2018). Post our recommendation, the stock retraced from higher levels to re-test the breakout levels, and thereafter, it surged higher to make fresh all-time high level of Rs 858.90. However, due to sell-off in the markets, the stock could not keep up its bullish momentum and retreated. Presently, it is trading near the breakout levels. We would advise our readers to hold this stock with a stop loss of Rs 780.