Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE



SPOT NIFTY : The Indian stock markets witnessed a soft opening to the week and it seemed that it will be yet another dull week as we had seen the markets moving in a range over the last four-five weeks. However, Tuesday’s trading session undoubtedly turned out to be the best trading session so far in the new calendar year on the back of hopes of a rate cut considering the low levels of WPI and CPI inflation. But, in the next two trading sessions, the indices were bidding time after the frantic rally. On the global front, UK Prime Minister Theresa May survived a no-confidence vote a day after she suffered a resounding defeat on her Brexit divorce deal. The US equities continued their 2019 rally, led by financials helped by a batch of constructive corporate earnings reports. On the domestic front, going ahead, there are no major economic data lined up, however, we will see a heavier Q3 earning reports hit the tape in the coming days, including heavyweights like Reliance Industries, HDFC Bank, Kotak Bank, ITC. As the week began, Nifty attempted a breakdown from the triangle pattern on an intra-day basis; however, it took support around its crucial 50-day moving average and pulled back to close within the pattern. While remaining in the current area formation, the index continued to consolidate near its crucial resistance zone of 10,910-10,950. In the coming session, Nifty may attempt to break out from the present pattern and such breakout will occur only after the Nifty closes above the 10,910-10,950 zone and any viable up move is likely to take place only after these levels are cleared. Till the time this happens, we may see Nifty consolidating in a capped range, where we may see stock-specific action as the results for Q3FY19 unfold. On the downside, strong support is seen around the 10,740-10,800 zone.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, surged by 1 per cent to end at 16.24. Nifty January 2019 future last price stood at 10,915 at a premium of 9.80 points over the spot closing of 10,905.20. Nifty February 2019 future last price stood at 10,947.25 at a premium of 42.05 point over the spot closing of 10,905.20. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.29 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, 10,900 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

ITI LTD ............ BUY .......... CMP Rs. 109.85

BSE Code ...... 523610
Target 1 .... Rs. 124
Target 2 .... Rs. 130
Stoploss ... Rs. 103 (CLS)



✓ Current Observation: On the weekly time frame, the stock, after registering all-time high, entered into corrective phase and the correction was arrested near its long term moving average, i.e. 200-week EMA.

✓ Recently, the stock has witnessed breakout of the downward sloping trendline resistance on the weekly time frame along with decent volumes.The stock is trading above its important short term moving averages, i.e. 20-day EMA and 50-day EMA. The weekly RSI has entered into bullish zone and is in rising trajectory. Also, the daily MACD stays bullish as it is trading above its zero line, which suggests a bullish bias.

✓ The level of Rs 102 is likely to act as a strong support for the stock and this can be maintained as a stop loss, while on the upside, the stock likely to touch the level of Rs 125, followed by Rs 130.

 ✓ Conclusion: Considering the breakout of the downward slopping trendline and the stock trading above its 20-day EMA, we recommend buying this stock for the target price of Rs 125, followed by Rs 130, with stop loss at Rs 102 level on a closing basis.

REVIEW OF STOCK STRATEGY

We had recommended buying the stock of Divi’s Laboratories at Rs 1,516.25 in Issue No. 12 (dated January 14, 2019). The stock remained in a range as the benchmark indices traded in a narrow range. However, the stock has potential to scale higher. We remain bullish on the stock as it has witnessed a decent breakout of the downward sloping trendline. Hence, we would advise to hold this stock for the target of Rs 1,590.