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NIFTY Index Chart Analysis

| 02/01/2018 Thursday

NIFTY Index Chart Analysis
Nifty @ 11350 - 11500 to Act as a Major Resistance 

After the broader markets initiated correction in the second week of January, it was time for the benchmark indices to follow suit. Accordingly, the benchmark indices are off their all-time highs after an energetic pre-budget rally. Apart from budget expectations, both Nifty and Sensex were moving up on D-street on stock-specific or sector-specific news and developments, in the midst of results season kick-off. The revival in Q3FY18 corporate earnings and related positive announcements kept the markets going in an otherwise weaker market breadth. The IT and banking sectors surged more than 2% in the last fifteen days after posting results in line with the expectations. The metal sector too shined after the Ministry of Steel sought import duty relaxation on petcoke. Globally, there was sell-off in the world’s largest economy ahead of the key events of the US President's State of the Union speech and Federal Reserve’s policy review. The US markets plunged in the wake of the rise in treasury yield and concerns over yet another rate hike by the Fed that would discourage the markets. Most Asian bourses followed this cue and so did the Indian markets. Going forward, the ongoing Q3 results, the sectorspecific beneficiaries or disadvantaged companies from the railway and Union Budget 2018-19 and the upcoming state elections would drive the markets. Nevertheless, any correction in the markets could be taken as buying at a discount, but if the markets bounce back with expected stock-specific buoyancy, the same opportunity can be used for protecting profits at peaks. 

Technically, after the pre-budget boom in the markets having discounted the Union Budget, our major benchmark index Nifty has, more or less, consolidated since January 23, wherein it has also neared our second major target of 11,200. Nifty had witnessed a gap-up opening and thereafter it corrected near to the gap-filling levels of 10975-10980. The said level also acted as 38.2% retracement of the prior upward move connecting Jan. 17 low and Jan. 29 high. Hence, on a provisional basis, we hold 10975 as our immediate support, followed by 10920-10860 in the short run. In case everything goes in line with the expectations, Nifty may bounce back, where we hold the levels of 11175-11200 as the major resistances. For the medium term on a weekly time frame, bears are trying hard to seize control of the game and any closing below 10975-10900 levels would drag Nifty to new lows. In that case, we hold 10730 followed by 10600 as the major supports. However, if the correction is just a breather after eight consecutive weekly upticks, then we hold 11350-11500 as the major resistances

STOCK RECOMMENDATIONS 

ITI LTD .......... BUY ....... CMP Rs118.55
BSE Code : 523610
Target 1 ..... Rs129
Target 2 ..... Rs135
Stoploss....Rs105(CLS) 

The stock of ITI Ltd is currently trading at Rs118.55. Its 52-week high/low stand at Rs164.90/Rs40.45 which were made as on October 26, 2017 and February 27, 2017. After hitting its 52-week and all-time high, the stock gave gradual lower tops and lower bottoms. The stock had attempted a bullish reversal after breaching Rs150-152 on the upside on January 2, but could not sustain the levels on a closing basis. Considering the weekly time frame, the stock has recently taken major support at 61.8% retracement level of the prior upward rally from August 11, 2017 week. In case the stock sustains above Rs107-109 levels next week on a weekly closing basis, it will have a great upside potential. Considering the daily time frame, the stock has bounced back after 9-10 downbeat sessions. The stock attempted bullish engulfing pattern during intra-day trading on January 30, 2018, with volume spurt and oscillators RSI and Stochastic’s almost a positive crossover in the oversold zone, suggesting a bounce back. We recommend a Buy on the stock. 

BHARAT PETROLEUM CORPORATION ....... BUY ..... CMP Rs491.90
BSE Code : 500547
Target 1 ..... Rs522
Target 2 ..... Rs535
Stoploss....Rs448 (CLS) 

The stock of BPCL is currently trading at Rs491.90. Its 52-week high and low stand at Rs550/Rs400.37 made on October 30, 2017 and June 27, 2017. After hitting its all-time high level on October 30, the stock fell sharply, but bounced back from 61.8% retracement level on November 14. The stock, however, could not breach the high and rather made a double top at Rs540.70 level on December 26 and 27 and witnessed a sharp fall of 14% up to January 19. However, the stock witnessed a double bottom at Rs465 on January 1 and 22. Recently, on January 20, the stock has given a consolidation breakout after 5 consecutive sideways movement, breaching its major resistance at Rs488 level. The stock also closed above its 200-day EMA resistance level of Rs485 on the same day. The breakout was supported by rising volumes and the 14-period RSI positive crossover just above the oversold zone. We suggest a Buy on the stock. 

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