Technicals

TECHNICALS

WHAT LIES AHEAD : NEAR-TERM PICTURE



There was huge volatility in the market on the day of the Union Budget and this was very much on expected lines. However, Nifty ended the day with a modest loss, but managed to hold the important psychological level of 11,000. The price action led to formation of a ‘high wave candle'.

Considering the medium-term picture, Nifty was off its all-time high and witnessed correction up to 23.6% retracement level of the sharp rally from the week of December 22. The volatility on the Budget day led to a formation of Doji on the weekly time frame. In case the candle acts as a breather, we may see continuation of the upside rally. However, if the next week confirms the Doji (bearish reversal), then we may see some more correction.

Going ahead, the level of 10,980 is a crucial support level for the index, and a close below this support level may open up for correction up to the levels of 10,900-10,880. On the upside, the level of 11,172 would be crucial to watch, as a move above this level would lead to an extension of the current leg of the upmove .

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




STOCK STRATEGY

MAHINDRA CIE AUTOMOTIVE .................. BUY ...................... CMP Rs.225

BSE Code: 532756
Target 1: Rs.240 Target 2: Rs.246
Stoploss: Rs.215(CLS)



Current Observation: On the daily time scale, the stock, after registering high of Rs 271.80 on December 27, 2017, entered into a strong corrective phase.

Recent sharp correction halted at the strong support zone formed by drawing a horizontal trendline, which is placed in the zone of Rs 217-222.

The stock formed a bullish candle on the daily chart, which is positive for the stock.

The 14-period RSI after entering the oversold zone is exiting the oversold zone.

The level of Rs 215 is likely to act as a strong support and this could be maintained as a stop loss for long positions.

On the upside, the stock is likely to touch the levels of Rs 240-246.

Conclusion: Considering that the stock took support around its important support zone and formed a bullish candle, we recommend buying this stock for the target price of Rs 240-246, with stop loss at Rs 215 level.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Suven Life Sciences Ltd at Rs 215.10 in issue no. 15 (dated January 29, 2018). Post our recommendation, the stock moved in line with our expectation and went on to achieve its target. We had given a ‘Book Profit' message at the level of Rs 239.75 through our SMS service on January 29, 2018. Thus, investors who had taken positions according this strategy would have made decent profits.