Technicals
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Buoyed by the decent corporate earnings coupled with easing of crude oil prices and rupee's bounce-back from all-time lows, Indian benchmark indices hit their respective peaks. Sensex was already in an all-time high hitting mode, but Nifty did it on the day of July derivatives expiry after gradual higher highs on the daily time frame. All-in-all, the benchmark indices gained more than 1.7 per cent during the last five trading sessions. The broader indices are said to have bottomed out and have outperformed the benchmarks, as the Midcap and Small-cap indices gained more than 4 per cent each. On the sectoral front, Realty and Metal bounced back and surged the most, registering 5 and 4 per cent gains, respectively. We had talked of the range of 11080-10925 for the Nifty, which was lately broken on the upside on July 23 on a closing basis. During the same period, Nifty hit three consecutive upticks with justifiable volumes and the 14-period RSI bouncing back from the downward sloping trendline pullback level. Our benchmark index Nifty hit above its January 29 high at 11,185 level after a day’s breather post three consecutive upticks. If Nifty continues to move northward with still some room left for going overbought, we hold 11205-11235 as immediate resistances, followed by 11450 in the medium term. However, Nifty price increase is not duly supported by the volume growth, and hence, if it corrects from the current levels, we hold 11125- 11090 as the supports, followed by 11060-11030. The level of 10925 will act as crucial support on the downside.
NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility decreased by 1.56 per cent to 12.02. Nifty August 2018 futures last price stood at 11,210.80 at a premium of 43.50 points over spot closing of 11,167.30. Nifty September 2018 futures last price stood at 11,223.90 at a premium of 56.60 point over spot closing of 11,167.30. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.40 for August month contract. Among Nifty calls, 11,200 Strike Price from the August month expiry was the most active Call. Among Nifty Puts, 11,000 Strike Price from the August month expiry was the most active Put. For the August series, the maximum OI outstanding for Calls was at 11,500 strike price and that for Puts it was at 11,000 strike price.
LEGEND :
EMA – Exponential Moving Average.
MACD – Moving Average Convergence Divergence
RSI – Relative Strength Index
STOCK STRATEGY
LEMON TREE HOTELS........... BUY............. CMP Rs 81.65
BSE Code ...... 541233
Target 1 .... Rs 91
Target 2 .... Rs 95
Stoploss ... Rs 74(CLS)
✓ Current Observation: The stock has faced resistance around the levels of Rs 80-81 since the beginning of May 2018.
✓ At present, the stock has breached its resistance of Rs 80-81 as defined by the horizontal trendline, along with robust volumes. Additionally, on the daily chart, the stock has formed a sizeable bullish candle.
✓ The stock is trading above its important short-term moving average, i.e. 21-day EMA.
✓ The RSI on the daily chart is quoting around 67. RSI has marked a fresh 14-period high, which is a bullish sign.
✓ The level of Rs 74 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 91-95.
✓ Conclusion: Considering the breakout of the horizontal trendline along with robust volumes, we recommend buying this stock for a target price of Rs 91-95, with a stop loss at the level of Rs 74.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Kaveri Seed Company Ltd.at Rs 563.25 in issue no. 40 (dated July 23, 2018). Post our recommendation, the stock continued its upward momentum and went on to achieve the mentioned target. On July 23, 2018, we recommended our readers to book profit in the stock at Rs 596.85 through our SMS service.