Dharmesh Shah of ICICI Direct.com Research
By Dharmesh Shah
ICICI Direct.com Research
The Nifty on Wednesday’s trade reacted lower from the upper band of the falling channel containing the entire price activity since mid of February 2018 placed around 10300 levels on the back of weak global cues as global trade war intensified.
We expect the index to extend the TimeWise consolidation and oscillate between a broader range of 9950 and 10300 levels while the focus will shift to stock specific action as we enter into Q4 earnings season.
We expect the broader markets to extend relative outperformance while index remains in consolidation mode
Structurally, we believe the index is undergoing a healthy bull market correction. Historically, within a bull market, corrections to the tune of 12-15 percent are considered as normal bull market corrections that provide long-term buying opportunities.
In the current context, the Nifty has already corrected 11 percent from lifetime high, equivalent to demonetisation correction (12 percent) levels in magnitude. Even the weekly RSI oscillator has taken support from demonetisation low of 41 levels.
The Nifty has a major resistance near 10300 as it is a confluence of the higher band of the falling channel, placed around 10300 and the 50 percent retracement of recent decline (10632-9952) placed at 10292 levels
Eicher Motors: BUY | CMP: Rs 28900| Target: Rs 32200| Stop loss: Rs 27110| Return 11%| Time frame: 6 months
The share price of Eicher Motors has seen a stupendous rally since CY10 witnessing a multifold rally. The stock recorded an all-time high of Rs 33480 in September 2017.
Since then, it has undergone a healthy corrective phase in last seven months and seen a base formation around the key value area of Rs 26500-27000.
Recently, the stock formed a higher high and higher low on the monthly chart after five months signalling that the corrective phase has approached maturity and the stock is likely to resume fresh up move.
In the last two months, the stock has been witnessing a base formation around the major support area of Rs 26500-27000 as it is the confluence of the following technical parameters:
a) The lower band of the rising channel containing the entire price activity since CY16 currently at Rs 27200
b) 61.8 percent retracement of the previous major up move (Rs 23000-33480)
c) The long-term rising 52 weeks EMA, which has acted as strong support for the stock since CY14
Based on the above technical observation, we believe the risk-reward remains favourable and offers fresh entry opportunity.
Time wise, the stock has already taken 29 weeks to retrace just 61.8 percent of the previous 27 weeks up move (Rs 23000 to Rs 33480). Shallow price wise correction and elongated time wise consolidation highlights the robust price structure.
Among oscillators, the weekly 14 period’s RSI has recently generated a bullish crossover above its nine period’s average thus supports the positive bias in the stock.
We expect the stock to resume uptrend after the current consolidation and head towards Rs 32200 in the medium term as it is the confluence of the previous highs and 80 percent retracement of the entire decline (Rs 33480-26208).
Disclaimer: The author is Head Technical, AVP at ICICI Direct.com Research. The views and investment tips expressed by investment experts on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.