Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : The Indian stock market began the week on a cheerful note, however, it failed to capitalize on the upbeat sentiment and, thereafter, it slipped lower as fears about a global slowdown increased. The fears were partially caused by the IMF reducing its 2019 global growth forecast and also due to the news that the US had cancelled a trade meeting with China. However, Nifty bounced back on Thursday after taking support near about the important moving average. In the coming week, news on the economic front will be light, while stock-specific action is likely to continue as companies will report their Q3 earnings. 

The Nifty was so near, yet so far from the psychological 11,000 mark. The index made an attempt to breakout in Monday’s session as it spent a major part of the trading session just above the crucial 10,950 mark. However, it failed to see a follow- through move in the next trading session and slipped lower to test the important 100-day and 200-day moving averages. At present, the index is trading at a crucial support level, and as long as the index stays above the 100-day and 200-day moving averages, there is no structural damage. But a decisive breach of this support would lead to losing the significance of ascending triangle pattern. Hence, the level of 10,800 is very crucial for the index in the near term as it is 61.8 per cent retracement level of the current upmove and also the 100-day moving average is placed near about this region. On the upside, 10,880 is likely to act as an immediate hurdle for the index, while 10,987 is likely to act as a major barrier. 

NIFTY DERIVATIVES: 

The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, dipped by 3.65 per cent to end at 17.43. Nifty January 2019 future last price stood at 10,877.60 at a premium of 27.80 points over the spot closing of 10,849.80. Nifty February 2019 future last price stood at 10,913 at a premium of 63.20 point over the spot closing of 10,849.80. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.13 for the January month contract. Among Nifty Calls, 10,900 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 10,800 strike price, and that for Calls, it was at 11,000 strike price. 

STOCK STRATEGY 

RADICO KHAITAN ............. BUY............ CMP Rs427

BSE Code ... 532497
Target 1 .... Rs 450
Target 2 .... Rs 465
Stoploss ... Rs 400 (CLS) 

✓ Current Observation: On the weekly time frame, after registering all-time high, the stock entered into corrective phase and the correction was arrested close to its long term moving average, i.e. 100-week EMA. 

✓ At present, on the daily time frame, the stock had witness breakout of triangle kind of pattern on January 23, 2019, which was supported with robust volumes. After registering high of Rs 436.95, the stock retraced and traded near the breakout price. At present, the stock offers a good entry point. 

✓ The stock is trading above its short-term moving average, i.e. 21-day EMA. The 14-period day RSI is in the rising trajectory and the fast stochastic is trading above slow stochastic, which suggests bullish bias. The level of Rs 400 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 is likely to touch the level of Rs 450, followed by Rs 465. 

✓ Conclusion: Considering the breakout of triangle kind of pattern and the stock trading above its 21-day EMA, we recommend buying this stock for the target price of Rs 450, followed by Rs 465, with stop loss at Rs 400 level on a closing basis. 

REVIEW OF STOCK STRATEGY 

We had recommended our readers buying the stock of ITI Ltd at Rs 109.85 in issue no. 13 (dated January 21 , 2018). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of around Rs 114.30. However, it did not sustain at higher levels as selling pressured emerged in the market and the stock slipped below the stop loss level. We recommended exiting the stock with a loss at Rs 103.90 on January 24, 2019.