Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: Key Indian benchmark indices are off their record levels since the start of August 2018. Before that, the indices were making higher highs almost every day at record levels. The correction or profit-booking was on account of the rate hike by RBI, while most of the other central banks in major economies kept the rates unchanged. Further, marginal slowdown in some macroeconomic numbers have also weighed on the markets which, together with the RBI policy, have countered the buoyancy from the corporate earnings. The broader market indices however seemed to have withstood the negative triggers and remained steady with Mid-cap and Small-cap indices outperforming the benchmark indices with 2 per cent plus gains. On the sectoral front, FMCG and Metal have fared well, registering 3 per cent and more gains during the last five trading sessions, while Auto and IT have remained subdued.

Our benchmark index Nifty formed a Doji pattern at its alltime high levels on August 1, which got confirmed on August 2, where Nifty gave an open-high and witnessed a steep fall in intra-day trading, thereby washing off prior three days' upside move. The correction was supported by considerable volumes and the 14-period RSI negative crossover in the overbought zone. Hence, going forward, if Nifty continues with profit- booking, we hold 11215 followed by 11160-11110 as the supports. However, considering the weekly time frame, if its just a pullback and Nifty bounces back, we hold 11295-11315 followed by 11330-11390 as the resistances .

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market's short term expectation of volatility, witnessed modest uptick of 0.16 per cent to 12.55. Nifty August 2018 futures last price stood at 11,276.05 at a premium of 31.35 points over spot closing of 11,244.70. Nifty September 2018 futures last price stood at 11,301.50 at a premium of 56.80 point over spot closing of 11,244.70. The Nifty Put- Call Ratio (PCR) Open Interest-wise stood at 1.36 for August month contract. Among Nifty calls, 11,500 Strike Price from the August month expiry was the most active Call. Among Nifty Puts, 11,200 Strike Price from the August month expiry was the most active Put. For the August series, the maximum OI outstanding for Calls was at 11,500 strike price and that for Puts, it was at 11,000 strike price.

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

STOCK STRATEGY

MANNAPURAM FINANCE ............... BUY ............... CMP Rs.109.30

BSE Code: 531213
Target 1: Rs.117 Target 2: Rs.122
Stoploss: Rs.102(CLS)



Current Observation: The stock, after registering high of Rs 130.45 in the month of May 2018, saw a vertical fall. The fall halted around the horizontal trendline support placed in the range of Rs 92-96.

At present, the stock has witnessed breakout from downward sloping trendline, along with decent volumes.

The stock is trading above its important short term moving average, i.e. 21-day EMA.

The RSI on the daily chart is trading in bullish zone and it has marked a fresh 14-period high, which is a bullish sign.

The level of Rs 102 is likely to act as a strong support for the stock and this can be maintained as a stop loss.

On the upside, the stock is likely to touch the levels of Rs 117-122.

Conclusion: Considering the breakout of the downward sloping trendline along with decent volumes, we recommend buying this stock for a target price of Rs 117-122, with a stop loss at the level of Rs 102.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Lemon Tree Hotels Ltd at Rs 81.65 in issue no. 41 (dated July 30, 2018). The stock did see some traction the very next day and touched high of around Rs 84.50. However, it failed to hold at the higher levels and slipped below our recommended price in next 3 trading sessions. However, the stock washed off three days losing streak on August 02 and traded above our Buying price. We would request our reader to hold this stock with a stop loss of Rs 74 for a target of Rs 91 in the short term.