Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: Indian benchmark indices reversed sharply from their record high levels at a pace faster than it took them to rise from mid-August to August-end. Even the broader market indices, which had broken out of their crucial resistance levels, retreated and plunged nearly 61.8% of the prior upward rally. The rupee depreciated continuously to record low levels amid dollar purchases, The tariff war concerns and the crude nearing the high of 2018 dragged down the market sentiments, thereby inducing the markets to retreat from their peak levels. Further, the weak domestic cues and RBI's reaction on the inflation numbers in the monetary policy too added fuel to the already weak market conditions. However, the rupee halted at the depth of 72.92 and bounced back to 72 level, ahead of the review meeting which is expected to check the fall by PM Modi, which is why the markets witnessed short covering on September 12.

Technically, considering the monthly time frame, Nifty has Open-High at 11751.80, which is unlikely to be broken on the upside. However, if it sustains above 11235-11335 on a monthly closing basis, we may expect October to be pleasant. Considering the daily time frame, Nifty was able to bounce back from above its crucial support level of 11235, and hence, in case the bounce continues, we hold 11410-11440, followed by 11500-11560, as the resistances. However, if it is a breather for a further downside, we hold 11155, followed by 11015, as the supports.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market's short term expectation of volatility, witnessed a sharp fall of 7.05 per cent to 14.25. Nifty September 2018 future last price stood at 11,412.90 at a premium of 43 points over the spot closing of 11,369.90. Nifty October 2018 future last price stood at 11,455 at a premium of 85.10 point over the spot closing of 11,369.90. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.06 for September month contract. Among Nifty calls, 11,400 strike price from the September month expiry was the most active Call. Among Nifty Puts, 11,300 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

AMBUJA CEMENT ............... BUY ............... CMP Rs.226.45

BSE Code: 500425
Target 1: Rs.240 Target 2: Rs.245
Stoploss: Rs.216 (CLS)



Current Observation: The stock had made a low of Rs 189 on July 17, 2018, and thereafter, the stock entered into an uptrend and marked a high of Rs 245.40 on September 3, 2018.

After marking a high of Rs 245.40, the stock had entered into a corrective phase and had witnessed a correction of almost 50 per cent of the entire upmove from Rs 189 to 245.40. Additionally, the stock took support around its 50-day SMA.

The stock has formed a sizeable bull candle, which is positive for the stock. The 14-period RSI on the daily chart is in the rising trajectory, which suggests bullish bias. The level of Rs 216 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 240-245.

Conclusion: We believe the stock is poised to head higher in the near term towards the levels of Rs 240, followed by 245, and traders can maintain a stop loss of Rs 216.

REVIEW OF STOCK STRATEGY

We had recommended our readers buying the stock of Cadila Healthcare Ltd at Rs 422.50 in issue no. 47 (dated Sept 10, 2018). Post our recommendation; the stock went on to touch the level of Rs 432. However, the stock was not able to hold at the higher levels due to sharp sell-off seen in the indices.

But the stock has bounced back from the lower levels and has held on to its support level of Rs 394, which we had suggested maintaining as a stop loss. We would therefore advise our readers to hold the stock with stop loss of Rs 394.