Technicals
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : The February series ended with a negative note with loss of about 42 point after witnessing huge volatility. During the month, Nifty made a failed breakout attempt and closed below the 10,800 level. Nifty closed just one point higher compared to the previous week. The overall sideways action continued for the 15th week. More than market movement, the worry now is the geopolitical situation as in the emotionally charged environment, the market may witness much more volatility in the coming days. As there are no positive fundamental trigger points in the near future, Nifty may mostly move within a range next week too, unless there is any further escalation in the Indo-Pak tensions. Technically, Nifty closed below 10,800 and the index did not sustain near the resistance zone of 10930-10940 and reversed back. In this process, it also formed a lower swing high at 10940. The negative divergence in MACD is also suggesting that the upside is almost limited. The 200-DMA is flattish as Nifty is moving around this for the last 15 weeks. The range indicator Bollinger Bands also contracted on 20 weeks of sideways movement. Now for the next week, 10965 will work as the critical resistance, and as long as this level is not violated, we may not get any confirmed long trade. At the same time, below 10834 level, the market will witness bearish moves. In case the 10,700-10,690 level is breached, we can see more downside, leading to a breach of the 10585 level too. Closing below 10585 level means the market will turn into a confirmed downtrend.
NIFTY DERIVATIVES: As February series ended, if we look at the rollover data, it is very poor compared to previous few months. The rollover witnessed was just 55.4 percent, which is less than the three-month and six-month averages. The lesser rollover indicates trend reversal and that people are not interested in taking fresh positions. The 7th March weekly options series PCR is currently at 1 per cent, which also suggests that the market may witness a downward move. The market-wide rollovers are also just near the last three-month average. The Bank Nifty rollover is at 62.76 per cent. India VIX fell by 3.29 per cent to 18.27 level. For the next week, the maximum Call open interest was seen at 11,000 and 10,900. On the other side, Put writing is witnessed in 10,600 and 10,500 strikes. With this data, the next week's maximum pain level is 10800. This suggests that unless there is a huge move on either side, the market may continue within the last week's range only.
LEGEND : EMA – Exponential Moving Average. MACD – Moving Average Convergence Divergence RSI – Relative Strength Index
STOCK STRATEGY
DIVIS LABORATORIES ........................... BUY ................... CMP Rs. 1651.55
BSE Code ...... 532488 Target 1 ....Rs. 1735 Target 2 ....Rs. 1765 Stoploss ...Rs. 1580
✓ Current Observation: The active pharmaceutical ingredients (API) manufacturer Divis Laboratories is trading near the all-time high and above all the crucial short and long-term moving averages i.e. 20, 50, 100 & 200-SMA.
✓ The stock is clearly on an uptrend as it is making higher highs and higher lows on the larger time frame.
✓ The trend strength is absolutely extremely high as the ADX is above 34 and -DI is much below the +DI and ADX. The RSI is in a strong bullish zone, meeting all range shift rules. Technically, the stock is sustaining above the 11-week stage 1 flat base, just 4 per cent away from the pivot on a weekly chart. Its price strength is extraordinarily high.
✓ Institutions have been accumulating this stock over the last two quarters. The consistent growth in EPS and sales, 15 per cent ROE and virtually debt-free status makes the company attractive fundamentally too.
✓ Conclusion: One can accumulate this stock at the current market price with a stop loss of Rs.1580. The targets are Rs 1735 and Rs. 1765
REVIEW OF STOCK STRATEGY
We had recommended buying the stock of Can Fin Homes at Rs 271.70 in Issue No. 18 (dated February 25, 2019). The stock remained within a range as the benchmark indices traded with high volatility while trading in a broad range. However, the stock has the potential to scale higher. We remain bullish on the stock as the stock has witnessed a decent breakout of the downward sloping trendline. Hence, we would advise investors to hold the stock for the target of Rs 295.