Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: Indian stock market bears still dominate the game even as the global financial crisis is dragging the world indices down. Despite the correction in oil prices, with the Brent oil falling below its crucial immediate support level of 75.64 and the short-covering in rupee by 23.6% of the fall from 68.26 to 74.49, Indian stock markets continued to trade southward. All thanks to the worrisome situations in the US markets and October F&O expiry week on the domestic front. Indian benchmark indices plunged 3.1 per cent and Midcap outperformed with 2.3% loss, while Smallcap underperformed and tumbled 4.7% since last Wednesday. On the sectoral front, IT dragged the markets down by falling 6.3% amid mixed results from the IT giants. Realty stayed positive and surged 1.2%. Technically, Indian benchmark index is trailing at the crucial support zone of 10200-10000, giving range-bound zig-zag movements on the daily time frame. The market breadth remained weak throughout the period. On the weekly time frame, Nifty tumbled for five consecutive weeks since 10751.80 in September 7 week, followed by a week’s breather. Thereafter, Nifty bounced back near the 38.2% retracement of the downward rally from 10751.80 to 10138.60, but retreated yet again for two more weeks as of now, falling below the previous low. On the daily time frame, volumes are justifiable and oscillators are inclined southwards. Hence, if Nifty falls below 10100-10000 on a closing basis, we hold 9950- 9850 as the immediate support, which is the trend reversal level. 9685 is the medium-term support. However, Nifty has sustained above 10100-10000 despite too much pressure from both domestic and global factors. Hence, if we see any bounce-back from the current level, we hold 10230-10395 as the resistances, while 10710 may act as the fresh rally level.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, closed almost unchanged at 18.96. Nifty November 2018 future last price stood at 10,191.90 at a premium of 67 points over the spot closing of 10,124.90. Nifty December 2018 future last price stood at 10,239.60 at a premium of 114.7 point over the spot closing of 10,124.90. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.36 for November month contract. Among Nifty calls, 10,500 strike price from the November month expiry was the most active Call. Among Nifty Puts, 10,000 strike price for the November month expiry was the most active Put. For the November series, the maximum OI outstanding for Puts was at 10,000 strike price, and that for Calls, it was at 10,500 strike price. 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 

RELIANCE INDUSTRIES .................... BUY ....................... CMP Rs.1030.20

BSE Code: 500325 
Target 1: Rs.1100 Target 2: Rs.1120
Stoploss: Rs.990(CLS) 



Current Observation: The stock ,after registering a high of Rs 1329 in the last week of August 2018, entered into a correction phase and marked a low of Rs 1016.40 and the recent corrective decline provides entry opportunity to ride the next upmove in the stock.

The stock on the weekly time frame has taken support near the rising trendline adjoining lows of September 2017- March 2018 and June 2018.

On the daily time frame, the stock has taken support near about its 200-D SMA and formed a reversal like candlestick pattern. In the current scenario, the daily stochastic oscillator is placed in the oversold territory, coinciding with a potential divergence on the daily RSI.

The stock has strong support around the level of Rs 990 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 1100, followed by Rs 1120.

Conclusion: Considering that the stock took support around the rising trendline on the weekly time frame and, on the daily time frame, the stock has managed to hold on to 200-D SMA, we would recommend buying this stock for a short-medium term period with a stop loss of Rs 990 on a closing basis and with an upside target of Rs 1100, followed by Rs 1120.

REVIEW OF STOCK STRATEGY

We had recommended to our readers buying the stock of Lupin Ltd at Rs 895.40 in issue no. 01 (dated October 22, 2018). After our recommendation, the stock had witnessed a corrective decline in line with the markets. At present, the stock has bounced back smartly from the lower levels and it is expected to continue its upward movement. We would advise our readers to hold on to the stock as it has strong support around the level of Rs 820-830 zone and, on the upside, the stock has potential to test the level of Rs 970.