Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : Indian stock markets had a disappointing and stressful start to the week weighed down by exit poll outcomes, which showed strong performance by the Congress and weakness in the global markets. Further, the surprise resignation of RBI governor Urjit Patel added fuel to the fire and this sent shivers down the spine of market participants as we saw yet another gap down opening on Tuesday. However, markets managed to recoup the entire losses and ended in the positive terrain as the picture became clear over the state elections. The news of the appointment of new RBI governor was taken well by the markets and the market participants gave a big thumbs up. This bullish tone continued on Thursday as well with the market reacting to the improved data as the IIP for the month of October came in at a robust 8.2 per cent, and the retail inflation cooling off to 2.3 per cent. On the global front, President Donald Trump expressed optimism about striking a trade deal with Chinese President Xi Jinping in an interview, which boosted the sentiments further. The correction which began from the higher level of 10,941 halted around the 61.8 per cent retracement of the last upmove (10,005-10,941). After halting its correction around the 61.8 per cent, it witnessed a sharp pullback. The Nifty, on the way up, has filled the gap that it had left recently on the daily chart and it also managed to clear the 200-day moving average. After over 450 points of rise from the low seen on Tuesday, we feel the Nifty is ripe for some consolidation. In the event of such consolidation, it is important for Nifty to hold above the 200-day moving average, which is currently placed at 10,754 level. while a breach of this support would lead to further correction towards the zone of 10,538- 10,583, which is a confluence of 38.2 per cent retracement level of the last upmove and the 50-day moving average. On the upside, the level of 10,941 would act as a strong resistance level.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, dipped by 1.64 per cent to end at 15.55. Nifty December 2018 future last price stood at 10,819.70 at a premium of 28.15 points over the spot closing of 10,791.55. Nifty January 2019 future last price stood at 10,863.55 at a premium of 43.85 point over the spot closing of 10,819.70. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.3 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, 10,800 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.

STOCK STRATEGY

CEAT LTD. ..................................... BUY ......................... CMP Rs1295.10
BSE Code ...... 500878
Target 1 .... Rs1400 
Target 2 .... Rs1460 
Stoploss ... Rs1190 (CLS) 

✓ Current Observation: The stock, after registering a low of around Rs 985.85 on October 26, 2018, witnessed an upmove. Thereafter, the stock was seen consolidating in a range for more than couple of weeks. 

✓ Recently, on the daily time frame, the stock had witnessed breakout of the consolidation range, along with a sizeable bullish candle and decent volumes. 

✓ The daily 14-period RSI has witnessed a crossover and it is trading in the bullish zone. The stock has been trading above its crucial short term moving average, i.e. 21-day EMA and it is in the rising mode, which is positive for the stock. 

✓ Daily MACD stays bullish as it trades above its signal line. 

✓ For any immediate decline, the level of Rs 1190 is likely to act as a strong support and this could be maintained as a stop loss for long position. On the upside, the stock is likely to touch the level of Rs 1400, followed by Rs 1460 

✓ Conclusion: Considering that the stock has given breakout of consolidation range along with a sizeable bullish candle, we recommend buying this stock for the target price of Rs 1400, followed by Rs 1460, with stop loss of Rs 1190 on a closing basis. 

REVIEW OF STOCK STRATEGY 

We had recommended our readers to buy the stock of Mahanagar Gas Ltd at Rs 871.05 in issue no. 07 (dated Dec 10, 2018). Post our recommendation, the stock touched a high of around Rs 892.20. The stock is still trading above our recommended price. 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 835 on a closing basis for a target of Rs 940, followed by Rs 960