Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: Indian key benchmark indices are off their record levels, all thanks to the rupee hitting new all-time low at 70.40 against the dollar. However, the domestic major macroeconomic numbers of CPI and WPI cooled below expectations to 4.17% and 5.09% in July. This brought about a neutral stance in the markets, thereby preventing a drastic fall. Further, the retail inflation falling near to RBI's target of 4% would delay rate hike for now, which has relieved the investors. All-in-all, we can say that the markets are consolidating at higher levels, where the weakness in rupee amid global concerns are offset by the macroeconomic numbers that provide relief simultaneously.

Technically, the benchmark index Nifty is off its record high levels. Nifty could not sustain at 11495, which was reached on August 9, and it retreated on the same day to close lower. Nifty continued the pessimism for two more trading sessions, followed by a breather on August 14. Nifty yet again retreated on August 16 with bears not letting the bulls to take control. The oscillators are still inclined southwards after negative crossover in the overbought zone.

Going forward, in case Nifty continues to dip, we hold 11340- 11330, followed by 11235, as the major supports, below which Nifty may see provisional trend reversal. However, in case of any bounce-back after the current prolonged breather, we may see 11450 as the major resistance, followed by 11500.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market's short term expectation of volatility, gained 2.71 per cent to 13.64. Nifty August 2018 futures last price stood at 11,417 at a premium of 31.95 points over spot closing of 11,385.05. Nifty September 2018 futures last price stood at 11,454 at a premium of 68.95 points over spot closing of 11,385.05. The Nifty Put-Call Ratio (PCR) Open Interestwise stood at 1.37 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

DR REDDY'S LAB ............... BUY ............... CMP Rs.2348

BSE Code: 500124
Target 1: Rs.2520 Target 2: Rs.2570
Stoploss: Rs.2200(CLS)



Current Observation: After registering a low of Rs 2020 on July 20, 2018, the stock entered into an upmove.

Recently, the stock witnessed breakout of ‘Bullish Flag Pattern' as on July 14, 2018, along with decent volumes and the stock has followed it with a sizeable bullish candle carrying higher high and higher low, indicating continued buying interest by market participants.

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 in a rising trajectory and trading in the bullish zone, which is a positive sign. The level of Rs 2200 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 2520-2570.

Conclusion: Considering the above factors, we expect the stock to move higher from the current levels and head towards the level of Rs 2520, followed by 2570, in the short-medium term. A stop loss at the level of Rs 2200 should be placed for this trade.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Jai Corp Ltd at Rs 165.85 in issue no. 43 (dated Aug 13, 2018). Post our recommendation, there was turbulence in the markets and the stock failed to hold on at the higher levels. As a result of this, the stock triggered the stop loss level and we recommended our readers to exit the stock through our SMS service.