Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE

SPOT NIFTY : Nifty recorded 5.2 per cent or 560 points rise in nine trading session and looked tired on Thursday. Since the last weekly expiry, it gained 2.84 per cent. Though it settled in a flat to positive territory, it oscillated in the green and the red throughout the day and eventually closed below the open level. The volumes had also decreased drastically. The major indicator is continuing in overbought zone since last one week. The profit-taking is visible in indices and some of the stocks. As of now, no distribution signs are found. Nifty may try to come off overbought condition. In the process, it may cool off for some time. Nifty outlook remains positive as there are no clear downward signals. But, on any day, a close below the previous bar low will lead to a downswing. The stochastic oscillator is in an extremely overbought condition for the last seven days. At this juncture, the risk-reward ratios are not favourable for long positions in Nifty. At the same time, do not short the index as there are no negative confirmations available. The immediate supports are placed at 11270 and 11195. Only a fall below 11080 may lead to further downside.



NIFTY DERIVATIVES: On a weekly expiry day, Nifty traded in a very narrow range. The volumes recorded in this month were lowest. The put-call ratio is also on the higher side since last week. Nifty also looks disconcerted at 78.6 retracement of Sep- Oct downfall. Before resuming its uphill journey, Nifty moved sideways to negative levels for some period. The rollovers were recorded at 9.26 per cent two weeks before March expiry. Open interest was higher by 2.55 per cent compared to the previous day. Maximum Put writing appeared on 11300 strike. The Call writing is much higher in 11400 strike. The max pain for the 20th March weekly expiry is at 11350 as per the data. The Implied Volatility (IV), which is a perception of future movement based on options data, is at the lowest point, which shows that the Nifty may move far away from here. With these derivative data points, it is better to avoid fresh long positions. Keep your existing longs with strict trailing stop losses. Wait for shorting opportunities. The stiff resistance is placed at 111420 and strong support is at 11200. Nifty may move in this range in the coming days and we may not get clear trading opportunities in the index

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

STOCK STRATEGY

AUROBINDO PHARMA .................... BUY ......................... CMP Rs.778.30

BSE Code ...... 524804

Target 1 ....Rs.830
Target 2 ....Rs.895
Stoploss ...Rs.755 (CLS) 



Current Observation:

Aurobindo Pharma, the tenth largest generic pharma company by sales globally, reported a 22 per cent expansion in sales and 20 per cent rise in net profit in the December quarter. The stock is trading near to the pivot and above the short and long term moving averages. Its price strength has improved to 86. The stock has recorded above average volumes this week.
✓ With improved earnings and 21 per cent return on equity, it looks fundamentally attractive too.
✓ Institutions are accumulating this stock. The number of funds invested in this stock increased by 6.34 per cent and their holdings increased by 1.07 per cent.
✓ The RSI shifted to bullish zone and the MACD is above the zero line and the signal line. The trend strength indicator ADX is at a healthy level of 24.47. The directional parameter +DI is much above the -DI. The stock is trading within the range of Rs 700-830 for the last 126 trading days. There are early signs of breaking out of this and moving upside.

Conclusion: Buy this stock at the current level with a stop loss of Rs 755. The immediate target is Rs 830. The target is open to its lifetime high of Rs 895 and above.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of RBL Bank Ltd at Rs 623.40 in issue no. 20 (dated March 11, 2019). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of around Rs 652. We had given a ‘Book Profit’ message at the level of Rs 648.45 through our SMS service on March 11, 2019. Thus, investors who had taken position according to this strategy would have made decent profit.