Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: The Indian stock market, after gaining for three consecutive weeks, has sapped its three-week winning streak as Nifty has lost 1.50 per cent in the current week. The market had a decent outing in the first trading session of the week and it managed to close just above its 200-D SMA. However, it failed to build on the gains as global cues played spoilsport and, as a result, profit-booking was seen in the domestic markets. On the Wall Street, technology stocks were hit hard and, as a result, Nifty IT plunged about 4.40 per cent during the week.

The Nifty, after witnessing breakout of the two week’s consolidation range of 10,440-10,650, extended its upmove towards the level of 10,774, and pretty much on the expected line, faced resistance around the crucial 200-D SMA and near to the lower end of the bearish gap which was seen on October 4, 2018. After encountering resistance at the 200-D SMA, Nifty declined for the third consecutive day. Going ahead, the 200-D SMA is likely to continue to pose threat to any upmove that Nifty will attempt. On the downside, the zone of 10,440-10,480 is a crucial support zone, as manifold supports are positioned in this region. To begin with, the 200-D SMA is placed at 10,482, followed by the 38.2 per cent retracement level of the recent upmove, which being from October's low and the recent swing low of 10,440 which was seen on November 13, 2018. All things considered, we recommended adopting highly cautious approach as Nifty is very close to its downside support zone of 10,440-10,480 and a decisive breach below this level would be a delight for bears as it may open up for correction up to the level of 10,200 in the medium term. On the flip side, a fresh upmove is likely to occur after the Nifty moves past its important 200-DSMA.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, decreased 1.28 per cent to 19.31. Nifty November 2018 future last price stood at 10518 at a discount of 8.75 points over the spot closing of 10,526.75. Nifty December 2018 future last price stood at 10,555.60 at a premium of 28.85 point over the spot closing of 10,526.75. The Nifty Put-Call Ratio (PCR) Open Interestwise stood at 1.27 for the November month contract.

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

STOCK STRATEGY

RCF ............BUY ............ CMP Rs.60.55

BSE Code: 524230
Target 1: Rs.65
Target 2: Rs.69
Stoploss: Rs.57.50 (CLS)


 
Current Observation: The stock, after registering a high of Rs 64.90 as on November 12, 2018, entered into correction mode and the correction halted near the lower end of the channel. After the halt in correction, the stock has witnessed an upmove, which suggests there is demand for the stock near the lower end of the channel.

On the monthly time frame, the stock formed a longlegged Doji-like candlestick pattern as on month ended October 2018.

The stock is trading above its crucial short term moving average, i.e. 20-DSMA.

The daily 14-period RSI has recently generated a bullish crossover above its nine period average and is in a rising mode, which supports the positive bias in the stock

The stock has strong support around the level of Rs 57.50 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 65, followed by Rs 69.

Conclusion: Considering that the stock has taken support at the lower end of the channel and the RSI has recently generated a bullish crossover, we would recommend buying this stock for a short-medium term period with a stop loss of Rs 57.50 on a closing basis and with an upside target of Rs 65, followed by Rs 69.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of REC Ltd at Rs 126.15 in the issue no. 04 (dated November 19, 2018). Post our recommendation; the stock has oscillated within a range. Going ahead, a breakout above the level of Rs 127 would result in a fresh breakout. We advised our readers to hold this stock as the stock is probably taking a breather post a sharp upmove from lower levels. We would suggest holding the stock with a stop loss of Rs 114.