Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: Indian stock market bulls somehow managed to outpace the bears on a weekly basis, but witnessed extreme moves on the daily time frame. Optimism in the US markets and a good start to the domestic earnings season pulled the markets up, but the prevailing trade tensions and crude oil price rise tried dragging the markets down. Further, the fear ahead of the probable rate hikes in December have kept the investors on their toes. The benchmark indices outperformed the Mid-cap index which gained 1.9%, while they underperformed the Small-cap index, which surged 3.4%. Almost all sectoral indices ended in the green, with FMCG and Power on the forefront of the move with gains of 4.3% and 3%, respectively. Our benchmark index Nifty bounced back from its recent low of 10138 level and surged near to its 38.2% retracement level, but retreated. Thereby, last week might have acted as a breather after 5 consecutive weekly falls. The bounce-back on the daily time frame was not supported by volumes. Nifty turned back from below its 200-day EMA level of 10752. Nifty has formed a bearish engulfing pattern on the daily time frame, and hence, if the retreat continues, we hold 10355-10320 as the immediate supports, provided the Nifty falls below the 10425 level. The levels of 10140-10120 will act as crucial support areas. On the other hand, if Nifty continues to bounce, we hold 10520- 10575, followed by 10755, as the resistances.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, climbed about 3.51 per cent to 17.98. Nifty October 2018 future last price stood at 10,445.95 at a discount of 7.10 points over spot closing of 10,453.05. Nifty November 2018 future last price stood at 10,498 at a premium of 44.95 points over the spot closing of 10,453.05. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 0.85 for October month contract. Among Nifty calls, 10,700 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 10,000 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 

LUPIN .................... BUY ....................... CMP Rs.895.40

BSE Code: 500257 
Target 1: Rs.970 Target 2: Rs.1020
Stoploss: Rs.820(CLS) 



Current Observation: The stock on the daily time frame registered a high of Rs 986 and, thereafter, it witnessed a sharp fall. During this fall, the stock took support at the lower end of the rising channel and the 200-D SMA was also placed near the lower end of the channel.

Recently, on the daily chart, the stock took support around the lower end of the rising channel formed by adjoining lows of July, August and October 2018 and, thereafter, the stock has witnessed a good upmove along with rising volumes.

The stock is trading above its long term moving average, i.e. 200-D SMA, which is positive for the stock.

The daily 14-period RSI witnessed a positive crossover and has a reading of 53. The stock has strong support around the level of Rs 820 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 970, followed by Rs 1020.

Conclusion: Considering that the stock took support around the lower end of the rising channel and the stock is trading above its crucial long term moving average, we would recommend buying this stock for a short term period with a stop loss of Rs 820 on a closing basis and with an upside target of Rs 970, followed by Rs 1020.


REVIEW OF STOCK STRATEGY

We had recommended to our readers buying the stock of Aurobindo Pharma Ltd at Rs 752.40 in issue no. 52 (dated October 15, 2018). After our recommendation, the stock went on to touch the levels of Rs 784-785. However, the stock is witnessing supply around these levels and, at present, the stock is trading near our recommended price. We would advise our readers to hold on to the stock as it has strong support around the level of Rs 719 and, on the upside, a closing above the levels of Rs 784-785 would be seen as a fresh breakout in the stock, which could then touch our mentioned targets.