Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : It has become routine for the Indian key benchmark indices to breach previous record highs, but these benchmarks ride on very few stocks to reach those peaks. Indian markets seemed to have overcome trade war fears between the US and China, while other cues are seen supporting the markets, be it crude or rupee-dollar movement. Further, the corporate earnings released so far have boosted the markets. The broader market indices were seen consolidating after breaching their first crucial resistance levels. 

Our benchmark index Nifty was trading with higher tops and higher bottoms (consolidating at the bottoms) after the downward sloping trendline breakout at 10810. Currently, Nifty has continued with the rally, but it could not breach the 10500-mark. The rally too looked somewhat exhausted with not much movement on the daily time frame. The 14-period RSI too is quoting above 70 in the overbought zone, but with no signs of reversal for now. It is the third consecutive upbeat week, or considering one breather in-between, the fifth consecutive upbeat week for the Nifty and hence we may see some correction in the coming week. In that case, we hold 11430-11365, followed by 11135, as the supports. However, Nifty is seen inching up almost everyday, though with gradual upbeats, and hence, if it surges further and breaches the 11500-mark, we hold 11545, followed by 11700, as the resistances.
 

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, increased by 1.04 per cent to 12.67. Nifty August 2018 futures last price stood at 11,484.90 at a premium of 14.20 points over the spot closing of 11,470.70. Nifty September 2018 futures last price stood at 11,514.95 at a premium of 44.25 point over the spot closing of 11,470.70. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.61 for August month contract. Among Nifty calls, 11,500 Strike Price from the August month expiry was the most active Call. Among Nifty Puts, 11,400 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 

JAI CORP................ BUY................. CMP Rs 165.85 

BSE Code ...... 512237
Target 1 .... Rs 180
Target 2 .... Rs 187
Stoploss ... 155(CLS)

 

✓ Current Observation: The stock witnessed breakout of falling trendline joining the highs of February 2018 at Rs 177.15, April 2018 at Rs 170.60 and June 2018 at Rs 160.80. The breakout was seen on the last trading session of the month of July. The breakout was seen along with robust volumes. 

✓ Thereafter, the stock was seen consolidating in a rangebound manner near its trendline breakout. But in today’s session. the stock has breached its small consolidation phase along with a sizeable bull candle, which is positive for the stock and indicates resumption of momentum. The stock is trading above its important short term moving averages, i.e. 21-day EMA and 50-day EMA. 

✓ The RSI on the daily chart is trading in bullish zone, which is a bullish sign. The level of Rs 155 is likely to act as a strong support for the stock and this can be maintained as a stop loss. n the upside, the stock is likely to touch the levels of Rs 180-187. 

✓ Conclusion: The aforementioned technical observations lead us to believe that the stock is likely to move higher and we expect it to touch the levels of Rs 180-187 in the short-medium term. A stop loss should be placed for this trade at the level of Rs 155. 

REVIEW OF STOCK STRATEGY 

We had recommended our readers to buy the stock of Manappuram Finance Ltd at Rs 109.30 in issue no. 42 (dated Aug 06, 2018). Post our recommendation, the stock went on to make a high of Rs 113.90, and thereafter, the stock is seen consolidating at higher levels. Once the consolidation phase ends, we expect the stock to reach our target level of Rs 117. We would advise our readers to hold this stock with a stop loss of Rs 102 for an upside up to the level of Rs 117.