Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: Indian stock markets witnessed a scintillating rally last week and kicked off the current week on a positive note as the outcome of the G20 summit lifted the market sentiments. However, the markets pared most of the gains to end flat. It seemed like a routine profit-booking after a sharp upside rally, however, the scary picture of the global peers, especially the US markets took the market across the globe by surprise as it witnessed a harsh fall on Tuesday as fears about a weaker economy came to the fore, as the yield curve presented an inverted picture after a long time. An inverted yield curve represents a preference for the shorter term debt due to uncertainty surrounding in the longer end of the curve. This had a rub-off effect on all other global peers and the Indian markets too remained under pressure and failed to take any sense of relief with Reserve Bank of India’s (RBI) policy decision to keep the repo rate unchanged.

The weakness persisted in the Thursday’s session as well and the Nifty has lost almost 2.60 per cent during the week. After starting its upward rally from the lower level of 10,490, Nifty registered a high of 10,941 and was seen resisting its important 100-day moving average. After resisting around the the moving average, Nifty witnessed correction and during this correction phase Nifty filled the gap of November 29 and slipped below its crucial moving average, i.e. 200-day moving average and also its 21-day moving average. On Thursday, Nifty not only opened with a gap-down, but the bears did get momentum on the downside after a gap-down start and ended the day near the lowest level of the day. Going ahead, the level of 10,440- 10,480 is a crucial support for the Nifty, while on the upside, any upmove is likely to be resisted around the zone of 10,748- 10,723 as this is the gap area created on December 6 and also the 200-day moving average is placed near this region.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, jumped by 4.95 per cent to end at 19.30. Nifty December 2018 future last price stood at 10619.80 at a premium of 18.65 points over the spot closing of 10601.15. Nifty January 2019 future last price stood at 10666 at a premium of 64.85 point over the spot closing of 10,601.15. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.08 for the December month contract. Among Nifty Calls, 11,000 strike price from the December month expiry was the most active Call. Among Nifty Puts, 10,500 strike price for the December month expiry was the most active Put. For the December 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 

MAHANAGAR GAS ............BUY ............ CMP Rs.871.05

BSE Code: 539957
Target 1: Rs.940
Target 2: Rs.960
Stoploss: Rs.835 (CLS)




Current Observation: The stock, after registering a high of around Rs 987 in early August 2018, witnessed a correction, which halted at the level of Rs 756 in the month of October 2018.

The stock was seen resisting around the band of Rs 869- 872 and, at present, the stock has seen a breakout of the horizontal trendline along with decent volumes.

The stock as on December 6, 2018 has formed a sizeable bullish candle, which is positive for the stock. The stock is trading above its crucial short term moving average, i.e. 21-day exponential moving average.

The 14-period RSI on the daily time frame has given a positive crossover and it is trading in positive territory. The stock has strong support around the level of Rs 835 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 940, followed by Rs 960.

Conclusion: Considering that the stock has witnessed a breakout of the horizontal trendline and the stock is trading above its crucial short term moving average, we would recommend buying this stock for a short-medium term period with a stop loss of Rs 835 on a closing basis, with an upside target of Rs 940, followed by Rs 960. 

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of SRF Ltd at Rs 2154 in issue no. 06 (dated Dec 03, 2018). Post our recommendation; the stock consolidated and headed upwards to register high of Rs 2197, and in line with market correction, the stock failed to hold at higher levels and retraced back. We continue to hold our bullish view on the stock, so we would request our readers to Hold this stock with a stop loss of Rs 2050 for a target of Rs 2280.