Technicals
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : The kick-off for Q1 of FY19 turned out to be positive for the Indian stock markets where the benchmark indices duly surpassed their crucial resistances, while the broader markets seemed bottoming out. Despite Donald Trump's final tariff blow to China and the bounce-back in crude prices keeping the rupee at the lower end, macroeconomic numbers have paved the way for an upmove in the markets in the recent past. May be the IIP and CPI inflation too seemed to have been discounted in the markets. All-in-all, the Indian benchmark indices are heading to the peak levels with bulls taking cautious baby steps by giving higher highs on a daily basis. The Indian benchmark index Nifty breached its downward sloping trendline breakout and its symmetric traingle pattern breakout on a daily basis. It has surged for the fifth consecutive trading session, breaking its crucial resistances at 10893 and 10929. Nifty has formed a ‘shooting star’ pattern which, if confirmed, may lead to some correction going forward. Here, we hold 10830-10810 as resistance-turned-supports, followed by 10750. However, if it is just a breather and Nifty continues to head northwards, we hold 11120-11135, followed by its peak, as the resistances.
NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for the market’s short term expectation of volatility, fell by 2.19 per cent to 12.50. Nifty July 2018 futures last price stood at 11,015.50 at a discount of 7.70 points over the spot closing of 11,023.20. Nifty August 2018 futures last price stood at 11,033.90 at a premium of 10.70 points over the spot closing of 11,023.20. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.56 for the July month contract. Among Nifty calls, 11,000 Strike Price from the July month expiry was the most active Call. Among Nifty Puts, 11,000 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
KPIT TECHNOLOGIES ...........BUY ............. CMP Rs 299
BSE Code ...... 532400
Target 1 .... Rs 323
Target 2 .... Rs 330
Stoploss ... Rs 284(CLS)
✓ Current Observation: The stock, after registering low of Rs 189.35 in February 2018, rallied all the way to the level of Rs 290.40 in June 2018. Thereafter, the stock entered into a sideways to corrective phase and tested its support of 50-day SMA. After taking support near its 50-DSMA, the stock bounced back and faced resistance around its all-time high level. This led to formation of horizontal trendline.
✓ Recently, the stock has breached its horizontal trendline resistance and witnessed follow-up buying.
✓ Since early 2018, the stock has managed to hold its 50-DSMA. There have been some instances where it has breached it on intra-day basis, but it has managed to respect it on a closing basis. The stock is trading above its 20-day and 50-day SMAs, which is positive for the stock.
✓ The 14-period RSI is trading in bullish territory. The level of Rs 284 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 323-330.
✓ Conclusion: Considering the breakout of horizontal trendline and the stock trading above its 20-day and 50-day SMAs, we recommend buying this stock for a target price of Rs 323-330, with a stop loss at the level of Rs 284
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Berger Paints Ltd. at Rs 289.70 in issue no. 38 (dated July 09, 2018). The stock continued its upward movement post the breakout and moved in line with our expectation. We had recommended our readers to book profit in the stock through our SMS service on July 9, 2018, at Rs 302. We hope all our readers benefited from this recommendation and made decent returns on this recommendation.