Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: NSE benchmark Nifty has rallied about 500 points from the March low (9952). With the US-China trade war easing somewhat, market participants will now look ahead to Infosys earnings and key macroeconomic reading on IIP and inflation (CPI) data for direction. The broader markets have underperformed the major benchmarks during the current week and, sector-wise, Nifty IT sector was at the forefront of the rally with about 4.5 per cent gains.

Technically, after witnessing breakout of a falling channel above 10,220-10,240 on April 5, 2018, Nifty has extended its upmove and has managed to close above its 100-day SMA. Going ahead, we expect Nifty to take a breather near 10,480-10,500 zone and enter into a broader consolidation range of 10200-10500 amid stock-specific action as we move into the Q4 earnings season. However, the overall bias remains positive and buying on dips would be an ideal strategy as long as bulls manage to hold on to the level of 10,200. Immediate support for the Nifty index is placed in the region of 10,320-10,350 and a sustainable slide below this support region would apply brakes on the recent rally and Nifty may test the level of 10,200. On the other hand, there are resistances placed in the region of 10,480-10,500.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market's short term expectation of volatility, dipped 1.34 per cent and reached 14.52. Nifty April 2018 futures closed at 10465.10 at a premium of 6.45 points over the closing of 10458.65. Nifty May 2018 futures closed at 10497.95 at a premium of 39.3 points over the spot closing of 10458.65. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.36 for April month contract.

Among Nifty Calls, Strike Price of 10,500 from the April month expiry was the most active Call. Among Nifty Puts, 10,400 Strike Price from the April month expiry was the most active Put. The maximum OI outstanding for Calls was at 10,500 strike price and that for Puts it was at 10,300 strike price.

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

STOCK STRATEGY

ITI LTD. ....................................... BUY .............................. CMP Rs.131.60

BSE Code: 523610
Target 1: Rs.145 Target 2: Rs.150
Stoploss: Rs.122(CLS)



Current Observation: The stock, after registering a high of Rs 164.90 in the month of October 2017, entered into a corrective phase. The stock made a low of Rs 96 in the month of February 2018 and entered into a pullback rally.

At present, on the daily time frame, the stock has witnessed breakout of downward sloping trendline formed by joining high of Rs 164.90. The breakout had happened on robust volumes.

The stock is trading above its 50-day and 100- day EMAs. The 14-period RSI on the daily time frame is on a rising trajectory and, above the 60-mark, which is positive for the stock.

The level of Rs 122 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 145-150.

Conclusion: Considering the breakout of downward sloping trendline and that the stock is trading above 50-day and 100- day EMAs, we recommend buying this stock for the target price of Rs 145-150, with stop loss at the level of Rs 122.

REVIEW OF STOCK STRATEGY

We had recommended buying the stock of Indian Terrain Ltd at Rs 189.20 in issue no. 25 (dated April 09, 2018). Post our recommendation, the stock has witnessed a decent upmove and went on to touch the level of Rs 200.

We had given a ‘Book Profit' message at the level of Rs 200 through our SMS service on April 9, 2018. Thus, investors who had taken positions following our recommendation would have made decent profits.