Treasury yields form a strong base for a fresh rise
A sideways consolidation above a trendline support strengthens the bullish case
Amrutanjan Health Care (₹748.2) Confirms double-bottom pattern
Amrutanjan Health Care’s stock overcame the resistance at ₹735 a fortnight ago. This has led to the formation of a higher high on the weekly chart, a bullish sign. In addition, the breakout of ₹735 also means that the stock has confirmed a double-bottom pattern, indicating a bullish reversal. Hence, the probability is high for the stock to appreciate from here. According to the chart pattern, the price can rise to ₹900. Therefore, traders can go long now at around ₹750 and accumulate if the price retraces to ₹700. Place stop-loss at ₹650. Revise this up to ₹750 when the scrip touches ₹810. Move the stop-loss further up to ₹800 when the price reaches ₹850. Liquidate the longs at ₹900.
JSW Energy (₹570.3) Strong support ahead
JSW Energy’s stock lost a little over 11 per cent last week. The decline was restricted by the support at ₹525, where the 20-week moving average lies. Below this is a rising trendline support. Thus, the price band of ₹500-525 is a good base and the share price is unlikely to fall below this region. Going ahead, we expect the scrip to see some more moderation, possibly to ₹525, and then witness the resumption of the broader bull trend. Therefore, participants can go long on JSW Energy at the current level of ₹570. Buy more shares if the price dips to ₹535. Place initial stop-loss at ₹500. When the stock surpasses ₹600, revise the stop-loss to ₹560. Trail the stop-loss to ₹590 when the price touches ₹620. Exit at ₹640.
REC (₹513.4) Stock set to resume uptrend
REC’s stock depreciated 8 per cent last week. But that was largely due to the fall on Monday. In the following sessions, it was tracing a sideways trend between ₹500 and ₹540. That said, the broader trend is bullish, and we see the latest fall in price just as a corrective decline. While there is a chance for the downswing to reach ₹475, the stock is expected to resume the rally. There is a potential for it to hit ₹600 in the near term. So, buy now at around ₹510 and on a dip to ₹475. Keep initial stop-loss at ₹440. Once the stock appreciates to ₹570, move the stop-loss upwards to ₹535. When the price touches ₹585, raise the stop-loss further to ₹560. Book profits at ₹600.
Dollar index and the US Treasury yields remained broadly stable last week. In the absence of any major data release from the US last week, both the dollar index and the yields were range bound. But this week, the US inflation data will be out.
The US Consumer Price Index (CPI) data will be out on Wednesday. The inflation number could move the market either way. If the data shows that the inflation is heating up again, then it would push the dollar index and the yields higher. So, the inflation numbers could set the direction for the dollar and Treasury yields going forward.
ROOM TO FALL
The dollar index (105.30) seems to be struggling to get a strong follow-through rise. The index rose to a high of 105.74 and then has come down from there. This keeps the chances alive of the index falling to 104.50104.30. The broad 104.50104 is a very strong support zone.
A break below 104 is less likely. As such, we can expect the dollar index to reverse higher again from the 104.50-104 support zone. That leg of rise will have the potential to take the dollar index up to 106-107 again.
Only a fall below 104, will bring the index under pressure to see 103-102 on the downside.
RUPEE WATCH
Rupee can gradually weaken towards 83.60 as long as it stays below 83.40
ABOVE SUPPORT
The US 10Yr Treasury yield (4.49 per cent) has a very strong support around 4.4 per cent, which is holding well for now. On the charts, the outlook is bullish - to see 4.6 per cent. A break above 4.52 per cent can trigger this rise. A further break above 4.6 per cent will boost the bullish momentum. Such a break can take the US 10Yr yield up to 4.8 per cent and 4.9 per cent in the coming weeks.
The outlook will turn negative only if the yield declines below 4.4 per cent. In that case, a fall to 4.3-4.2 per cent can be seen.
RESISTANCE AHEAD
The euro (EURUSD:1.0771) has risen back from the low of 1.0725 last week. However,
strong resistance is in the broad 1.08-1.0850 region, which can cap the upside. As long as the euro stays below 1.0850, the bias will remain negative to break below 1.07. Such a break can take the currency down to 1.06 initially and then to 1.0450 eventually in the coming weeks.
A strong break above 1.0850 is needed to strengthen the bullish case for a rise to 1.10-1.11 again.
NARROW RANGE
The Indian rupee (USDINR: 83.50) was stuck in a narrow 10-paise range of 83.4283.52 last week. Within this, it has closed at the lower end the range at 83.50 on Friday. On the charts, it looks like the rupee can gradually move down towards 83.60 as long it stays below 83.40. A break below 83.60 can drag the rupee down to 83.80.
Rupee has to get a sustained break above 83.40 to move up towards 83.30 and 83.20.