Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE



SPOT NIFTY:Indian stock market bears continue to hold the controls of the markets with a series of negative domestic and global events supporting the southward move. Markets also remain cautious ahead of rate hikes by both Fed and RBI before the year end, The Q2FY19 earnings data would most likely disappoint amid rising crude oil prices and rupee falling to its record low levels and, mostly importantly, markets taking a political view with the state elections at the doorstep.

The benchmark indices shed more than 3% from the corresponding day of the last week. The Mid-cap and Small-cap indices too tumbled but at a slower pace, losing 3% and 2.3%, respectively. On the sectoral front, Metal index led the downside move and slipped 7.4% and Realty followed with 5.7% loss. The only sector that stayed flat was the Bankex. Technically, our benchmark index Nifty had formed a reversal Doji on October 8, which turned into a whipsaw on October 11, where Nifty fell below 10198 at 10138 level. Hence, if we consider the current move to have initiated another downside rally post three days' breather, we hold 10100-10000 as the crucial support zone, followed by 9950, which is a trend reversal level. The levels of 9780-9680 will be the medium term supports.

However, Nifty has managed to close above 10200 on a closing basis, and hence, if it lifts itself up for short-covering in the first place, we hold 10375, followed by 10520, as the resistances.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, jumped about 14.68 per cent to 20.54. Nifty October 2018 future last price stood at 10,258.55 at a premium of 23.90 points over spot closing of 10,234.65. Nifty November 2018 future last price stood at 10,309.10 at a premium of 74.45 point over the spot closing of 10,234.65. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 0.90 for the October month contract. Among Nifty Calls, 10,500 strike price from the October month expiry was the most active Call. Among Nifty Puts, 10,000 strike price from the October month expiry was the most active Put. For the October series, the maximum OI outstanding for Puts was at 10,000 strike price, and that for Calls, it was at 10,500 strike price.

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

STOCK STRATEGY 

AUROBINDO PHARMA .................... BUY ....................... CMP Rs.752.40



BSE Code: 524804 
Target 1: Rs.827 Target 2: Rs.848
Stoploss: Rs.719(CLS) 

Current Observation: The stock on the weekly time frame witnessed breakout from downward sloping trendline adjoining highs of October 2016 and November 2017 as on the first week of October 2018, and thereafter, the stock went on to touch the level of Rs 827. After marking a high of Rs 827, the stock has witnessed a re-test of breakout point of the trendline and, as a result, provides an entry opportunity in the stock.

On the daily time frame, the stock is trading above its important medium term moving average, i.e. 100-DMA and the 100-DMA is in the rising mode.

The RSI on the weekly time frame is trading in bullish territory, which is positive for the stock.

The stock has strong support around the level of Rs 719 and the same can be maintained as a stop loss level. On the upside, the stock has the potential to test the level of Rs 827, followed by Rs 848.

Conclusion: Considering that the stock has witnessed a re-test of the trendline breakout and the RSI on the weekly time frame is in the bullish territory, we would recommend buying this stock for a short term period with a stop loss of Rs 719 on a closing basis and with an upside target of Rs 827, followed by Rs 848.

REVIEW OF STOCK STRATEGY

We had recommended to our readers buying the stock of Avenue Supermarts at Rs 1342.85 in issue no. 51 (dated October 08, 2018). Post our recommendation, the stock went on to touch the level of Rs 1385 and, at present, the stock is trading above our recommended price. We are of the view that the technical perspectives of the stock are promising, and hence, we would recommend our readers to hold this stock with a stop loss of Rs 1250.