Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY: The key Indian benchmarks sustained an upsurge, but with cautious steps ahead of the US-China meet on trade war negotiations. Even the recently held Federal Reserve meeting signalled rate hike in the near term to counter the economic boom, with the inflation rate expected to rise persistently above the 2% target. The global currencies, including the rupee, had mostly witnessed depreciation ahead of the talks and Fed’s signals. Even on the commodities front, the trade war concerns dragged down the global copper price, thereby pressurising metal and mining stocks. This time around, the broader market indices were a mixed bag with the Mid-cap index outperforming the key benchmarks, while the Small-cap underperformed. Nevertheless, all indices gained more than 1 per cent. On the sectoral front, FMCG and Power sectors led the pack, gaining more than 3 per cent each. All other sectors ended in the green too, but Bankex and Realty remained subdued with marginal gains. Technically, Indian benchmark index Nifty gave a consolidation breakout at the higher level of 11495 and has sustained above this level on a weekly closing basis, registering probably the fifth consecutive weekly uptick for the Nifty. On the daily time frame, Nifty gave a gap-up opening on August 23, but being an open-high at 11620.70, it witnessed intra-day correction. Hence, going forward, if 11670 is broken on the upside, we hold 11750-11775 as the next resistance, followed by 12000 as the medium-term resistance. However, an upside movement with baby steps and oscillators in the overbought zone can cue some correction. Hence, if Nifty falls below 11550, 11480- 11440 will act as supports, followed by 11340, which will act as provisional trend reversal.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, dipped 1.16 per cent to 12.75. Nifty August 2018 future last price stood at 11,596 at a premium of 13.25 points over the spot closing of 11,582.75. Nifty September 2018 future last price stood at 11,635.95 at a premium of 53.25 point over the spot closing of 11,582.70. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.61 for August month contract. Among Nifty Calls, 11,600 Strike Price from the August month expiry was the most active Call. Among Nifty Puts, 11,500 Strike Price from the August month expiry was the most active Put. For the August series, the maximum OI outstanding for Puts was at 11,500 strike price and that for Calls, it was at 11,600 strike price.

LEGEND : 

EMA – Exponential Moving Average.
MACD – Moving Average Convergence Divergence
RSI – Relative Strength Index 

STOCK STRATEGY

ADANI PORTS...............BUY ............CMP Rs. 383.80

BSE Code ...... 532921
Target 1 .... Rs. 402
Target 2 .... Rs. 407
Stoploss ... 368(CLS)

✓ Current Observation: The stock, after registering high of Rs 406.40 on August 6, 2018, underwent a corrective phase and marked a low of about Rs 369 and, thereafter, it witnessed a pull-back up to the level of Rs 382 and again it slipped lower to mark a bottom near the same price. This led to formation of a double bottom pattern.
✓ Presently, the stock has managed to give a breakout above the highest peak between the two bottoms, which is around the levels of Rs 381-382.
✓ The stock has managed to cross its important long-term moving average, i.e. 200-day EMA.
✓ The RSI on the daily chart is in a rising trajectory and trading above its 9-day average.
✓ The level of Rs 368 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 402-407.
✓ Conclusion: Based on the above technical observations, we expect the stock to touch the levels of Rs 402-407 in the shortmedium term. We suggest traders to maintain a stop loss of Rs 368 for this trade.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Dr Reddy’s Laboratories Ltd at Rs 2347.95 in issue no. 44 (dated August 20, 2018). Post our recommendation, the stock moved higher and went on to achieve our target price of Rs 2520. We advised our readers to book full profit in the stock at the level of Rs 2471.05 through our SMS service on August 23, 2018. We hope all our readers have benefited from this recommendation.