Technicals
WHAT LIES AHEAD: NEAR-TERM PICTURE
SPOT NIFTY: Indian benchmark indices witnessed a rampage at the dawn of September 2018 where bears exploited the exhaustion of bulls at the peak levels to their advantage. The rupee hitting record low level of 72.11 amid rise in crude prices created panic in the markets on fears of further tightening by the RBI in the coming policy review. The not-so-good auto sales numbers and PMI data too added to the weakness, despite the GDP rising to 8.2% in Q1FY19. All-in-all Indian benchmark and broader markets witnessed profit-booking. The Mid-cap index underperformed and tumbled more than 3%. Sector-wise, FMCG and Realty were the lead draggers with 4.8 and 3.7% losses. Barring IT, which gained 2.5%, all other sectors ended in the red. Technically, Nifty had formed a Double Whammy pattern as it had formed Bearish Belt Hold and Bearish Engulfing patterns on the daily time frame on September 3, thereby leading to a sharp reversal. The bearish engulfing pattern on September 3 too confirmed the correction. Nifty fell nearly 87% of the upward rally from 11340 and bounced back. Now, Nifty is trailing near the 38.2% retracement of the sharp downward correction. In case the bounce continues, we hold 11615, followed by 11750, to act as the resistances, provided Nifty breaches 11560-11570 on a closing basis. However, if the bounce-back is just a short covering and if Nifty turns back, we hold 113430-11390, followed by 11340, as the supports.
NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market's short term expectation of volatility, witnessed marginal upmove of 0.51 per cent to 13.72. Nifty September 2018 future last price stood at 11,546.70 at a premium of 9.80 points over the spot closing of 11,536.90. Nifty October 2018 future last price stood at 11,588.35 at a premium of 51.45 points over the spot closing of 11,536.90. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.15 for September month contract. Among Nifty Calls, 11,600 strike price from the September month expiry was the most active Call. Among Nifty Puts, 11,500 strike price from the September month expiry was the most active Put. For the September series, the maximum OI outstanding for Puts was at 11,400 strike price and that for Calls, it was at 11,800 strike price.
LEGEND :
EMA - Exponential Moving Average
MACD - Moving Average Convergence Divergence
RSI - Relative Strength Index
STOCK STRATEGY
CADILA HEALTHCARE ............... BUY ............... CMP Rs.422.55
BSE Code: 532321
Target 1: Rs.455 Target 2: Rs.470
Stoploss: Rs.394 (CLS)
Current Observation: The stock had been trading in broad range of about 110 points in the range of Rs 422.80 to Rs 332.75 since the last week of April 2018.
At present, the stock has witnessed breakout of this broad range. On the daily chart, the stock has formed a sizeable bullish candle along with decent volumes.
The stock is trading above its important short-term moving average, i.e. 21-day EMA. The daily MACD remains in an uptrend and is seen diverging from its signal line, suggesting strong upward momentum.
The daily 14-period RSI is in a rising trajectory and trading in bullish zone.The level of Rs 394 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 455-470.
Conclusion: Based on the aforesaid technical evidence, we expect the stock to move higher from here on and head towards the levels of Rs 455-470 in the short term. A stop loss at Rs 394 is recommended for this trade.
REVIEW OF STOCK STRATEGY
We had recommended to our readers buying the stock of India Cement Ltd at Rs 125.70 in issue no. 46 (dated Sept 03, 2018). Post our recommendation; the stock went to touch the level of Rs 128. But a sharp sell-off seen since the beginning of the week dragged the stock lower and, as a result, the stop loss for this long trade was triggered.
We had advised our readers to exit this recommendation through our SMS service on September 4, 2018.