Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: Indian stock markets seemed to be in a ‘Santa Rally’ mode as domestic markets completely shrugged off extremely weak session in the US markets on Friday and started the first trading session of the week on a cheerful note. Thereafter, Nifty continued its jubilant run and surpassed its early December high of 10,941, despite high volatility seen in the US markets. However, on Thursday, Nifty opened the session lower after the US indices registered their lowest closing level in over a year as the US Fed raised interest rate for the fourth time this year, which was in line with what most market participants had anticipated. However, the Fed has left the door open for more hikes in 2019 as against the market expectation of no hike or only one rate hike.

Nifty after registering low of 10,334 on December 11 rallied about 650 points in about last seven trading sessions. In the process, the index cleared its 100-day moving average and also registered new swing high of 10,985. However, due to jitters in the global markets, Nifty opened with a gap-down on Thursday, but the index showed tremendous resilience and managed to recoup almost the entire losses to close flat. Going ahead, we expect the markets to consolidate or take a breather in the form of minor correction as the present structure on the charts is slightly overstretched along with the stochastic oscillator, which is currently in the overbought territory. During this phase of temporary breather, we expect the area of 10,845-10,816 to act as an important support level as holding above this region would keep the pullback options open or else we could test the 200-day moving average which stands at 10,765. On the upside, a follow-through move above 10,985 is likely to open up for further upside towards the levels of 11,085-11,090.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, dipped by 2.25 per cent to end at 14.33. Nifty December 2018 future last price stood at 10,986 at a premium of 34.30 points over the spot closing of 10,951.70. Nifty January 2019 future last price stood at 11027.10 at a premium of 75.40 point over the spot closing of 10,951.70. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.45 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, 10,900 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 

NAVIN FLUORINE INTERNATIONAL ................. BUY .......... CMP Rs.746.60

BSE Code: 532504
Target 1: Rs.815
Target 2: Rs.835
Stoploss: Rs.690 (CLS)



Current Observation: On the weekly time frame, the stock, after registering high of Rs 779.65 in September, 2018, entered into a corrective mode.Correction halted at the level of Rs 590.45 and, thereafter, the stock witnessed a pull-back rally. Recently, the stock took support around its 100-week EMA and bounced sharply.

At present, the stock has given breakout of downward sloping trendline drawn adjoining high of Rs 880-Rs 779.65 on the weekly scale. Also, the breakout was supported by huge jump in volumes.

On the daily time frame, the stock is trading above its important moving average, i.e. 200-day moving average.

The 14-period RSI on the daily time frame is trading in bullish zone and also the RSI line has moved above the trendline connecting the highs of November 2018 and mid-December. Moreover, the RSI line is still below the overbought region. All this bodes well for the short-medium term price structure. The level of Rs 690 is likely to act as a strong support for the stock and this can be maintained as a stop loss. On the upside, the stock is likely to touch the level of Rs 815, followed by Rs 835.

Conclusion: Considering the breakout of downward sloping trendline and the RSI is in bullish territory, we recommend buying this stock for a target price of Rs 815 -Rs 835, with a stop loss at the level of Rs 690 on a closing basis.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Ceat Ltd at Rs 1295.10 in issue no. 8 (dated December 17, 2018). The stock moved higher post the breakout and went on to touch the level of Rs 1344.95. We had given a ‘Book Profit’ message at the level of Rs 1339.20 through our SMS service on December 18, 2018. Thus, investors who had taken positions following our recommendation would have made decent profit.