Technicals
WHAT LIES AHEAD: NEAR-TERM PICTURE
SPOT NIFTY: The strong macroeconomic numbers released at the start of July 2018 refrained Indian stock markets from falling further. The robust auto sales numbers and the higher manufacturing and services PMI pulled the markets gradually up, despite the weak global cues. The benchmark indices witnessed a pullback after an upward sloping trendline breakdown last week. The broader markets too consolidated at the bottom levels without going down further. Earlier, the rupee fell to its lowest level of 69.09 against the dollar and the Brent crude bounced back to about USD 79/barrel level, i.e. heading towards its current peak of USD 80.50 /barrel. These factors dragged down the markets where the benchmark indices just kissed the downward sloping trendline breakout level drawn from their all-time high levels, but the indices could not sustain on a closing basis and retreated. Nifty too hit above 10865 at 10893 levels, but retreated to hit below the symmetric triangle pattern at 10700. However, Nifty took support at its major support zone of 10550-10558 at 10557 and bounced back to retest the trendline level at 10760. Meanwhile, Nifty also took 100-day EMA support. Going forward, we hold 10815-10835, followed by 10895, as the resistances, while 10700-10644, followed by 10550, as the supports.
NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market's short-term expectation of volatility dipped by 0.71 per cent to 12.57. Nifty July 2018 futures last price stood at 10760 at a premium of 10.25 points over the spot closing of 10749.75. Nifty August 2018 futures last price stood at 10779 at a premium of 29.25 point over spot closing of 10749.75. The Nifty Put-Call Ratio (PCR) Open Interestwise stood at 1.21 for July month contract. Among Nifty Calls, 10,800 strike price from the July month expiry was the most active call. Among Nifty Puts, 10,700 strike price from the July month expiry was the most active Put. For the July series, the maximum OI outstanding for Calls was at 11,000 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
BERGER PAINTS ................... BUY ................. CMP Rs.289.70
BSE Code: 509480
Target 1: Rs.310 Target 2: Rs.324
Stoploss: Rs.271(CLS)
Current Observation: The stock has been in an uptrend since March 2018 as it rallied from Rs to 238 to the all-time high of Rs 305.70 in May 2018. In the present scenario, we believe the stock has undergone a healthy correction and is currently providing fresh opportunity for entry.
The zone of Rs 271-273 is a value area for the stock as it is the confluence of 50 per cent retracement of the upmove which began in March 2018 to May 2018 (Rs 238-305.70) and 100-day EMA.
At present, the stock has witnessed breakout of triangle like pattern with decent volumes, which suggest the stock is likely to resume its uptrend.
The stock is trading above its 50-day and 100-day EMA, which is positive for the stock. The 14-period RSI is in a rising trajectory and trading above the 9-day average. The level of Rs 271 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 310-324.
Conclusion: Considering the breakout of triangle-like pattern and the stock trading above its 50-day and 100-day EMAs, we recommend buying this stock for a target price of Rs 310-324, with a stop loss at the level of Rs 271.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Ipca Laboratories Ltd.at Rs 683.70 in issue no. 37 (dated July 02, 2018). The stock witnessed follow-up buying and moved higher as per our expectation. The stock achieved its target level of Rs 730 and we had recommended our readers to book profit in the stock through our SMS service on July 5, 2018, at Rs 718. We hope all our readers benefited from this recommendation and made handsome returns on this recommendation.