Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE
 


SPOT NIFTY: Indian benchmark index Nifty is off its recent high of 11076- 11078 after resisting thrice near these levels. However, Nifty was also seen taking support at 10925 level, depicting range-bound volatility amid Q1 corporate earnings. Even Sensex faced resistance after hitting all-time high levels. The broader markets continued with lower tops and lower bottoms, with Mid-cap and Small-cap indices shedding 3 per cent and 4.7 per cent , respectively. Sectorwise, realty and metal refrained the markets from bouncing back with nearly 6 per cent losses, while IT turned positive to flat after profit-booking at peak levels. Nifty gave a reversal at the 10550 level, which was its 100-day EMA level. It hit a kind of double bottom and, thereafter, witnessed a consistent upside breaching its symmetric triangle breakout at 10800, followed by two major resistances breakouts at 10893 and 10929 made on June 13 and May 15, respectively.

Going forward, we expect range-bound volatility to continue in the Nifty at the higher levels. The levels of 11080 and 10925 would act as the immediate resistance and support levels, respectively. Beyond 11080, we hold 11117, followed by the all-time high as resistances, while if Nifty continues with profit-booking below 10925, we hold 10880-10820 as supports.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market's short term expectation of volatility, dipped by 0.66 per cent to 13.59. Nifty July 2018 future last price stood at 10,983 at a premium of 25.90 points over spot closing of 10,957.10. Nifty August 2018 future last price stood at 11,000 at a premium of 42.90 point over spot closing of 10,957.10. The Nifty Put-Call Ratio (PCR) Open Interestwise stood at 1.35 for July month contract. Among Nifty calls, 11,000 Strike Price from the July month expiry was the most active Call. Among Nifty Puts, 10,900 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 10,800 strike price.

LEGEND : 
EMA - Exponential Moving Average
MACD - Moving Average Convergence Divergence
RSI - Relative Strength Index

STOCK STRATEGY

KAVERI SEED COMPANY ........... BUY ............ CMP Rs.563

BSE Code: 532899
Target 1: Rs.585 Target 2: Rs.610
Stoploss: Rs.530(CLS)



Current Observation: The stock, after registering swing high of Rs 594.15 in June 2018, entered into a corrective phase and corrected up to the level of Rs 533. Thereafter, the stock witnessed a pullback up to the level of Rs 569.20, and it again slipped lower near to the previous swing low of Rs 531. The stock formed a strong base around the levels of Rs 530-533, which also coincides with 61.8 per cent retracement of the recent upmove and its 50-day SMA.

Recently, the stock breached its downward sloping trendline resistance, along with decent volumes. Additionally, on the daily chart, the stock has formed a sizeable bullish candle.

The 14-period RSI is on a rising trajectory and trading above its 9-day average. The level of Rs 530 is likely to act as 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 595-610.

Conclusion: Considering the breakout of downward sloping trendline along with decent volumes, we recommend buying this stock for a target price of Rs 585-610, with a stop loss at the level of Rs 530. 

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of KPIT Technologies Ltd.at Rs 289.70 in issue no. 39 (dated July 16, 2018). Post our recommendation, the stock went to log its fresh all-time high level of Rs 305, but it failed to hold at the higher levels and saw a pullback. We continue to be bullish on this stock and we would recommend our readers to hold this stock with a stop loss of Rs 284.