Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE

Finally, the markets witnessed profit booking at record high levels, after the cautious move upwards since the second week of January. Indian stock markets got spooked after the announcement of the Union Budget 2018-19 which focused on the upliftment of the farmers and the poor and completely ignored the expectations of the equity investors. To make matters worse, the budget dealt a blow to the investors' sentiments in the form of tax on LTCG and DDT, which led to a bloodbath on the D-Street. Moreover, multi-year record sell-off in the US markets led to the further downfall in the global and Indian bourses. Monthly macros are mixed, with de-growth in manufacturing and growth in the services sector. Auto sales too remained mixed. Going forward, the remaining frontline Q3 results will drive the markets.

However, benchmark indices have bounced back lately following the reversal in broader markets. However, whether it is a breather or fresh buying is not yet confirmed. Overall, considering the 5-day data, all indices, including the sectoral indices, have ended in the red, with banks, realty and power stocks at the forefront of the move.

Indian markets snapped their seven-day losing streak on Thursday. The price action formed a bull candle with shadows on either side. Going forward, the zone of 10,600-10,640 is likely to act as an intermediate hurdle as the 50-day EMA is placed in this region and 38.2% retracement of the recent fall from 11,172 to 10,276. Hence, a decisive move above 10,600-10,640 would lead to extension of the pullback rally toward 10,720, followed by 10,800. On the lower side, the level of 10,450-10,500 is a strong support for the Nifty as this is the area where Nifty had faced quite a bit of resistance in the last quarter of 2017, and hence, these levels are expected to lend support to the Nifty. The RSI on the daily chart has a reading of 42 and has witnessed bounce back from the level of 35.

Current Observation: On the daily time scale, the stock, after registering high of Rs 756 on October 19, 2017, entered into a strong corrective phase.

The correction halted near about its long term moving average, i.e. 200-day EMA.

At present, the stock has witnessed breakout of downward sloping trendline joined from the high of Rs 756 and Rs 695, which is positive for the stock. Additionally, the stock has formed a sizeable bull candle with robust volumes.

The 14-period RSI is on a rising trajectory and trading in the bullish zone.

The stock is trading above its important moving average, i.e. 50-day EMA.

The level of Rs 655 is likely to act as a strong support and this could be maintained as a stop loss for long positions. On the upside, the stock is likely to touch the levels of Rs 756-770.

Conclusion: Considering that the stock has given breakout of downward sloping trendline and formed a sizeable bullish candle, we recommend buying this stock for the target price of Rs 756-770, with stop loss at Rs 655 level.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Mahindra CIE Automotive Ltd at Rs 225 with a stop loss of Rs 215 in issue no. 16 (dated February 05, 2018). Due to fierce sell-off in the stock markets on the back of global meltdown, the stock failed to find any support at the level of Rs 215 as it slipped below the stop loss level. We recommend our readers to exit with a loss. We exited the stock at a loss of Rs 212.30 on February 02, 2018.