Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE



SPOT NIFTY : The broad market indices in 2018 disappointed investors with 1.89 per cent return as against the stellar return of 28.64 per cent in 2017. For a major part of the year, volatility was on the higher side. Going ahead, volatility is likely to remain on the higher side as lot of events are lined up in 2019. The Indian stock market witnessed range-bound trading last week. Although, the market traded in a narrow range of 430 points, it remained volatile. Whenever Nifty came around the level of 11,000, it witnessed immediate sell-off and, therefore, it could not sustain above this psychological level. The domestic traders seemed to have gone into relaxed mood, while foreign investors stayed away from the markets ahead of the year-end festive season. The equity benchmarks began the week with modest gains despite the depressing cues from the global peers but, at the end, strong selling emerged and eventually the index closed near the day's low. On Wednesday, indices witness gap-down opening following weakness seen across Asian markets. However, on Thursday, index witnessed jubilant start as cues from the Asian market were positive after Wall Street posted its largest single-day gain in its history. The market remained lethargic, rather than volatile, even on the derivatives expiry day of the last week of December 2018. The correction that began from the higher level of 10985.15 halted around the 50-day simple moving average. The price action formed a bullish candle carrying a long lower shadow, which highlights emergence of buying demand near the 50-day simple moving average. The Nifty on the way up managed to give marginal close above the 200-day simple moving average, which is currently placed at 10772.34. Going ahead, the 200-day simple moving average is likely to act as pivot point for the index, A sustainable close above these levels would lead to an extension of the rally up to the level of 10918, which is the confluence of 100-day moving average. However, a breach of this pivot point would lead to further correction towards the zone of 10530- 10580, which is a confluence of 38.2 per cent retracement level of the last upmove and the 50-day moving average.

LEGEND : 

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

STOCK STRATEGY

NIIT TECH ...................... BUY ...................... CMP Rs. 1149.40

BSE Code ...... 532541
Target 1 .... Rs. 1210
Target 2 .... Rs. 1230
Stoploss ... Rs. 1095 (CLS)



✓ Current Observation: The stock, after registering high of Rs 1425.20 on September 3, 2018, entered into a corrective phase. The correction halted near 38.2 per cent Fibonacci retracement level of its entire upward move starting from the low of March 2017 to the high of early September 2018.

✓ Considering the daily time frame, the stock has presently witnessed breakout of downward sloping trendline formed by connecting swing highs from early September 2018. Also, the breakout was supported by relatively higher volumes.

✓ The stock has been trading above its short term moving average, i.e. 21-day EMA and it is in a rising mode, which is positive for the stock. The 14-period day RSI is quoting around 55.88 and it has already given positive crossover.

✓ The level of Rs 1095 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 level of Rs 1210, followed by Rs 1230.

✓ Conclusion: Considering the breakout of the downward slopping trendline and the stock trading above its 21-day EMA, we recommend buying this stock for the target price of Rs 1210-1230, with stop loss at Rs 1095 on a closing basis.



REVIEW OF STOCK STRATEGY

We had recommended buying the stock of Navin Fluorine International Ltd at Rs 746.60 in issue no. 9 (dated December 24, 2018). After our recommendation, the stock touched high of around Rs 754.85. However, the stock failed to sustain at higher levels and retraced back. At present, the technical pattern looks good and hence we recommended investors to hold the stock with a stop loss of Rs 690 on a closing basis.