Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: The bulls had witnessed a sharp pullback rally on Monday; however, the benchmark indices failed to get a follow-through move on the upside and they continued to move southwards on Wednesday and Thursday, breaking their important psychological mark as the ghost of the strong dollar, Brent crude oil price rise and the weak monthly auto sales numbers spooked the Indian markets.

The benchmark indices have plummeted more than 3 per cent during the week, and in line with the frontline indices, selling was seen in the broader markets as well with Nifty Mid-cap losing about 2.75 per cent, while the Nifty Small-cap dipping about 1.93 per cent. The selling pressure was seen across the sectors, barring Nifty Metal. The correction was led by Nifty Auto, Nifty Pharma and Nifty FMCG. Technically, after testing the support level of 10,775-10,850 multiple number of times in a span of last 7 to 8 trading sessions, the index finally breached its crucial support zone on Thursday and moved below its 200-DMA for the first time after May, 2018. Going ahead, the levels of 10,530-10,550 is likely to act as a support level for the index and a follow-through move below this level may take the index towards levels of 10,400-10,310 in the short term. On the higher side, we believe that the levels of 10,775-10,850 is likely to act as a stiff resistance for the index. If we speak of the short-medium term, the trend is certainly in favour of the bears. However, we feel that the current weakness is now overdone and we might see a pullback rally, which could be resisted at the levels of 10,775-10,850.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, jumped about a 4.36 per cent to 18.91. Nifty October 2018 future last price stood at 10,599.90 at a premium of 0.65 points over the spot closing of 10,599.25. Nifty November 2018 future last price stood at 10,650.95 at a premium of 51.7 point over the spot closing of 10,599.25. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.01 for the October month contract. Among Nifty Calls, 11,000 strike price from the October month expiry was the most active Call. Among Nifty Puts, 10,500 strike price from the October month expiry was the most active Put. For the October series, the maximum OI outstanding for Puts was at 10,500 strike price, and that for Calls, it was at 11,000 strike price.

LEGEND: 
EMA - Exponential Moving Average 
MACD - Moving Average Convergence Divergence 
RSI - Relative Strength Index 

STOCK STRATEGY 

AVENUE SUPERMARTS ............... BUY ............... CMP Rs.1,342.85

BSE Code: 540376 
Target 1: Rs.1460 Target 2: Rs.1500
Stoploss: Rs.1250(CLS) 



Current Observation: The stock, after registering a high of Rs 1680 as on February 2, 2018, entered into a correction phase and marked a sequence of lower tops and lower bottoms.

The stock has formed a sizeable bullish candle on the daily chart near about its 61.8 per cent retracement level of its entire upmove from February to August 2018. Additionally, the stock has formed a hammer-like pattern on the weekly time frame, though we have one trading session remaining in the weekly close.

The 14-period RSI on the daily time frame is hinting a reversal from the oversold territory as it has crossed its 9-day average. On the weekly time frame, the RSI is trading above the 40-mark. The stock has strong support around the level of Rs 1250 and the same can be maintained as a stop loss level.

On the upside, the stock has the potential to test the levels of Rs 1460, followed by Rs 1500.

Conclusion: Considering that the stock has taken support around its 61.8 per cent retracement level and formed a sizeable bullish candle, we recommended buying this stock for the short term with a stop loss of Rs 1250 on a closing basis and with target of Rs 1460, followed by Rs 1500.

REVIEW OF STOCK STRATEGY

We had recommended to our readers buying the stock of Vedanta Ltd at Rs 240.40 in issue no. 50 (dated October 01, 2018). Post our recommendation, due to the selling pressure in the markets, the stock slipped lower and marked a low of around Rs 226, which was near to our stop loss level. However, the stock managed to hold this level on a closing basis and bounced back to hit the level of Rs 246.90.

We would advise our readers to hold this stock as it is showing good strength in otherwise highly volatile markets.