Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE

 

The jump in country’s ease of doing business by 23 places to the 77th rank cheered the domestic investors, who are now hoping continuation of the BJP’s reign for the next 5 years. Indian benchmark index Nifty witnessed some bounce-back from its crucial support level of 10,000 amid encouraging corporate earnings reports during the last five trading sessions. Further, correction in crude oil prices and, thereby, the bounce-back in rupee too buoyed the market sentiments, resulting in bottomfishing in few stocks. The broader market indices outperformed the benchmark indices, with the Mid-cap and Small-cap indices surging 6.4% and 5.5%, respectively, as against 2%-plus in both Nifty and Sensex. On the sectoral front, the realty sector led from the front with 6.7% gains, while FMCG and metal sectors remained flat. 

Technically, Nifty after registering a low of 10,004.55 as on October 26, 2018, has witnessed a smart pull-back rally, where it has witnessed about 61.8 per cent retracement of the recent fall which started on October 17, 2018, from the high of 10,710 to the low of 10,004.55. Going ahead, to continue this pull-back rally, Nifty will have to move past and stay above the 10,400-10,450 zones. The region of 10,400-10,450 is a crucial resistance for the bulls as it is confluence of 61.8 per cent retracement of the last leg of fall from the high of 10,710 to the low of 10,004.55, and the opening downside gap which was formed on October 19 is placed in this region and the downward sloping trendline adjoining the levela of 11,145.55-10,710 is placed in this area. Until the zones of 10,400-10,450 are breached and the Nifty sustains above that, the vulnerability of the index from volatile bouts of sell-offs will remain. However, a close above the 10,400-10,450 region would set the stage for the next leg of the upmove, where the Nifty may attempt to touch the level of 10,540, followed by the major hurdle which is placed in the region of 10,675-10,765 as it is the confluence of October 17 swing high of 10,710 and 38.2 per cent retracement of the major correction which begin in the last week of August from the high of 11,760 and the 200-DMA is placed in this region. On the downside, immediate support is seen around the level of 10,270, followed by 10,180. The 14-period RSI on the daily chart is quoting around the 45 mark and it has recently marked a fresh 14-period high, which is bullish. The daily MACD is trading above its signal line. Overall, the bulls, during this high volatility and corrective decline, have managed to defend their major support zone of 9950-10,020 and having done this now, they need to move past 10,400-10,450 zone and stay above this zone to confirm a temporary bottom formation. 

LEGEND : 

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

BANK NIFTY 

On the weekly time frame, after registering high of 28,388.65 in the last week of August, 2018, the banking benchmark index Bank Nifty witnessed a sharp correction of almost 14.5 per cent; however, the price took support around the lower end of the channel, which was plotted by joining lows which were seen in the month of March 2018. The index bounced back from the lower end of the channel, however, it faced resistance at 38.2 per cent retracement level of the last leg of decline which started from level of 28,388.65 to the low of 24,240 and its 52-week SMA. Going ahead, the banking index has strong support in the region of 24,250-24,630 as it is a confluence of 78.6 per cent retracement of the entire upmove from March to August, i.e. from 23,605 to 28,388.65 and the lower end of the channel is placed in this region. On the upside, Bank Nifty needs to get past the immediate resistance level of 25,350-25,400 and moving past this zone would probably open up for further upside up to the levels of 25,830-25,930 as it is the confluence of 38.2 per cent retracement of the last of decline (28,388.65- 24,240) and the 52-week SMA. The 14-period RSI on the daily chart is quoting around the 50 mark and it has recently marked a fresh 14-period high, which is bullish. The daily MACD is trading above its signal line. 

REVIEW OF STOCK STRATEGY 

We had recommended our readers to buy the stock of Reliance Industries Ltd at Rs 1030.20 in issue no. 2 (dated Oct 29, 2018). Post our recommendation; the stock continued its pull-back rally and touched high of Rs 1093.85. We advised our readers to book full profit in the stock at the level of Rs 1092.40 through our SMS service on October 29, 2018. We hope all our readers have benefited from this recommendation.