Technicals

WHAT LIES AHEAD : NEAR-TERM PICTURE 

SPOT NIFTY : I The Indian stock markets since the beginning of November had made no major headway and spent the first half of the month within a range. The fall in the crude oil prices helped ease investors' concerns over inflation and fiscal deficit along with stronger rupee, which bolstered investors' optimism in the domestic economy. The volatility in the global markets kept the markets jittery at higher levels. The broader indices have underperformed the benchmark indices. 

Over the last couple of weeks, the Nifty has been fluctuating in the range of 10,440-10,650. It has made several attempts to cross the hurdle of 10,650 on the higher side but all in vain, as traders preferred to take profits off the table at the upper band of the range. In the coming week, we continue to expect the zone of 10,650-10,760 posing stiff resistance for the index. Unless Nifty successfully moves past this 110- point resistance area, we do not see any significant move in the index. Manifold resistances are positioned in this region, which is 200-day SMA placed at 10,756 and the bearish gap which was created on October 4. On the downside, the zone of 10,390-10,440 is a crucial support level for the Nifty as multiple supports are present in this region. In a nutshell, the index has consolidated in a range for a couple of weeks and has not shown any major corrective decline, thus we assume it is making a strong base, and after a strong base formation, the index needs to move past the level of 10,760 for any significant upmove. 

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, dipped 2.02 per cent to end at 18.45. Nifty November 2018 future last price stood at 10,623 at a premium of 6.30 points over the spot closing of 10,616.70. Nifty December 2018 future last price stood at 10,665 at a premium of 48.30 point over the spot closing of 10,616.70. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.49 for the November month contract. Among Nifty calls, 10,700 strike price from the November month expiry was the most active Call. Among Nifty Puts, 10,600 strike price for the November month expiry was the most active Put. For the November series, the maximum OI outstanding for Puts was at 10,000 strike price, and that for Calls, it was at 11,000 strike price.

STOCK STRATEGY

REC LTD............. BUY............ CMP Rs 126.15
BSE Code ...... 532955
Target 1 .... Rs 137 
Target 2 .... Rs 144
Stoploss ... Rs 114 (CLS) 

✓ Current Observation: The stock, after registering a high of Rs 223.90 in the first half of May 2017, entered into a correction phase and the stock marked a series of lower tops and lower bottoms on the higher time frame. The correction halted around the level of Rs 89 and the stock entered into a pullback rally and went on to touch the level of Rs 122.75. However, it failed to sustain at the higher levels and dropped back to the level of Rs 94, thus marking a double bottom-like pattern on the higher time frame. 

✓ The stock has also witnessed breakout of multi-touch point downward sloping trendline connecting highs of May 2017, November 2017, January 2018 and September 2018 along with decent volumes. Thereafter, the stock has witnessed follow-up buying, which indicates strength in the breakout. 

✓ On the daily time frame, the stock is trading above its crucial moving averages, i.e. 100-day SMA and 200-day SMA. 

✓ In the current scenario, the RSI on the weekly time frame is inching higher, which is positive for the stock. 

✓ The stock has strong support around the level of Rs 114 and the same can be maintained as a stop loss level. 

✓ On the upside, the stock has the potential to test the level of Rs 137, followed by Rs 144. 

✓ Conclusion: Considering that the stock has witnessed breakout of multi-touch point downward sloping trendline in the higher time frame and the stock is trading above its crucial moving averages on the daily time frame, we would recommend buying this stock for a short-medium term period with a stop loss of Rs 114 on a closing basis and with an upside target of Rs 137, followed by Rs 144.