Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE



SPOT NIFTY :

During the week, the Indian stock markets have remained trapped in a range amid high volatility. Though no major downsides were witnessed, Nifty did not make any major upmove as well. On the global front, markets have moved higher and marked their highest level in the last couple of weeks as the US-China trade talks concluded, giving fresh hope to the global markets and the FOMC December meeting's minutes indicated that the Federal Reserve can afford to be patient about the future rate hike. In the near term, traders' focus would shift towards Q3FY19 results and the domestic macroeconomic data like IIP, CPI and WPI, which are likely to dictate the trend of the market in the coming sessions. Throughout the week, Nifty has continued to resist the 100-day moving average. Though the Nifty has been posting modest gains in four of the past five trading sessions, it has not seen any major upmove and it is yet to move out of the triangle formation that is seen on the daily charts. Going ahead, Nifty will have to move past the zone of 10,890-10,925 to achieve any sustainable upward movement. A close above the zone of 10,890-10,925 would open the gates for the level of 11,090, as it is 61.8 per cent retracement level of the entire corrective phase since August 2018. Failure to cross the hurdle will lead to further range-bound oscillation, where the level of 10,700 is likely to act as a strong support level as the 50-day moving average is placed around this level. In a nutshell, the underlying bias remains positive, but unless the overhead resistances are taken out, we will see the markets continuing to remain volatile and face profit-taking at higher levels.

NIFTY DERIVATIVES:

The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, surged 0.46 per cent to end at 15.34. Nifty January 2019 future last price stood at 10,853.95 at a premium of 32.35 points over the spot closing of 10,821.60. Nifty February 2019 future last price stood at 10,880 at a premium of 58.40 point over the spot closing of 10,821.60. The Nifty Put-Call Ratio (PCR) Open Interestwise stood at 1.21 for the January month contract.

Among Nifty Calls, 11,000 strike price from the January month expiry was the most active Call. Among Nifty Puts, 10,800 strike price for the January month expiry was the most active Put. For the January series, the maximum OI outstanding for Puts was at 10,500 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 

DIVI'S LABORATORIES ....................... BUY ....................... CMP Rs.1516.25

BSE Code: 532488
Target 1: Rs.1590
Target 2: Rs.1630
Stoploss: Rs.1450 (CLS)



Current Observation: The stock, after registering 52-week high of Rs 1577 as on November 19, 2018, entered into corrective phase and the correction was arrested near its support around the Rs 1420 level. At present, the stock has witnessed breakout of the downward sloping trendline resistance on the daily time frame chart along with robust volumes. |

Additionally, the stock formed a sizeable bullish candle on the breakout day, which adds strength to the breakout. The stock is trading above its important short-term moving average, i.e. 21-day SMA, which is positive for the stock. The daily 14-day RSI took support around the level of 40 and, at present, it is trading above its 9-day average.

The stock has strong support around the level of Rs 1450 and this could be maintained as a stop loss level. On the upside, the stock is likely to touch the level of Rs 1590, followed by Rs 1630

Conclusion: Considering the breakout of downward sloping trendline and the stock trading above its 21-day SMA, we recommend buying this stock for the target price of Rs 1590, followed by Rs 1630, with stop loss at Rs 1450 on a closing basis. 

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Balrampur Chini Ltd at Rs 107.15 in issue no. 11 (dated January 7, 2019). Post our recommendation, the stock moved higher and went on to achieve our target price of Rs 113.

We advised our readers to book full profit in the stock at the level of Rs 112.80 through our SMS service on January 4, 2019. We hope all our readers have benefited from this recommendation.