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.
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
The share price of Indian Hotel has been resilient in the recent correction as it traced out a consistent buying support near key support of Rs 125, which culminated in a potential double bottom formation.
With investor sights on earnings visibility, selective buying is favouring hotel stocks. Indian Hotels stands out, especially, on relative strength rating. We believe the technical set up favors a fresh entry in the stock ahead of the next up move.
The share price surpassed its 2008 peak to register a fresh lifetime high of Rs 161 in January 2018. A subsequent correction from lifetime highs got anchored at the key support of Rs 125 as it is the confluence of the following technical parameters:
a) Breakout level above July-August 2016 and May 2017 peaks around Rs 125-130 range.
b) 61.8 percent retracement of the previous up move (Rs 100-161)
Double bottom formation at Rs 125 during February and March 2018 makes it a key support, going forward.
Time wise, the stock has already taken 10 weeks to retrace just 61.8% of the previous sixteen weeks up move (Rs 100 to Rs 161). Shallow price wise correction and elongated time wise consolidation highlights the robust price structure.
Considering the robust price structure and above-mentioned technical observations, we expect the stock to resume its uptrend and head towards Rs 169 in the medium term as it is the 123.6 percent external retracement of the recent decline (Rs 161-125) at Rs 169 levels.moneycontrol