Mar 17, 2017 08:17 AM IST | Source: Moneycontrol.com

Create fresh long once Nifty closes above 9,160; 5 five stocks to buy based on technical parameters

The index made a high of 9,158 on Thursday; however, it is placed near the upper-end of the current Gann channel i.e. 9160 which warrant some caution.

Create fresh long once Nifty closes above 9,160; 5 five stocks to buy based on technical parameters

Pritesh Mehta

After taking a breather earlier in the week, strength in the global markets propelled the index higher as it made a new peak in Thursday’s session. Currently, the index is sustaining above the midpoint of the three-digit Gann channel i.e. 9010.

The index made a high of 9,158 on Thursday; however, it is placed near the upper-end of the current Gann channel i.e. 9160 which warrant some caution.

Moreover, multiplication of 180 degrees by applying a square of 9 from the significant low of 6,826 is placed at 9,142. So the confluence of pressure points are seen around 9,160, suggests that fresh longs should be created once Nifty confirms a move above 9,160.

Failure to break above the same could lead to a period of sideways consolidation. After a strong gapping action on Tuesday and a follow-up move in Thursday’s action, Nifty might enter into a period of consolidation.

By applying price projections, immediate resistance levels are placed between 9,160-9,200. During current bull-run (from 7894), Nifty50 has witnessed six upward gaps, however, a decisive break below 9,060 is essential to label today’s gap as an exhaustion gap.

IIFL Wealth & Asset Management lists out 5 stocks which are looking attractive based on technical parameters for medium term:

Adani Ports: BUY above Rs 325| Target Rs 360, Stop Loss Rs 310

On the long term charts, Adani Ports continues to move in an upward sloping channel. Following a phase of consolidation at the top (after one month), it has registered an upside breakout; thereby resuming its previous uptrend.

During the period of sideways correction from the second week of February to the first week of March, it retraced from the peak of Rs316 to Rs291. It took support at the lower-end of the current Gann channel and provided a pullback.

It is displaying trait of a typical trending counter, which after a period of consolidation tends to resume its upmove. “We expect the stock build on Thursday’s momentum and attempt Rs360 in the medium term,” said Mehta.

It appears to be the best pick in terms of current chart structure and better risk-reward set-up from the Adani group stocks. Traders can buy Adani Ports above Rs 325 with a stop loss of Rs 310 for a target of Rs 360.

Tata Chemicals: BUY above Rs 580| Stop Loss Rs 565, Target Rs 625

The point of polarity support around Rs 548 has provided strength for the stock to break above the downward sloping trendline on the daily chart. In the process, it also registered a close above the midpoint of the current gann channel i.e. Rs577.

Thursday’s session was the first occasion since 22nd February which ensured a close above Rs577. A sustenance above the same will provide strong follow-through movement in the stock.

After a strong price-volume action in Thursday’s trade, momentum is likely to continue and the stock could attempt Rs625 i.e. upper-end of the three-digit current Gann channel.

On the long term charts, confirmation above Rs 600 would also ensure classic range breakout at the top, bringing an end to consolidation activity.

“Based on above parameters, we recommend a buy on Tata Chemicals above Rs580 with a stop loss of Rs565 for an upside target of Rs625 in the medium term,” said Mehta.

SRF: BUY above Rs 1,620| Stop Loss Rs 1,585, Target Rs 1,705

The month of February 2017 saw SRF going through a sharp decline as it witnessed a fall from Rs1,784 to a low of Rs1,506. Thereafter, it has gone through a period of base building. Entire movement since 17th February could be termed as the phase of bottoming out.

It was stuck in a narrow range for last one month, unable to make any decisive move. However, it managed to hold on to its lower-end of four-digit Gann channel (i.e. Rs1526), suggesting the presence of strong support after a down move.

In Thursday’s session, it confirmed a breakout from the recent consolidation phase and also the midpoint of the current Gann channel. Moreover, on the weekly bar, SRF is attempting an NR7 pattern breakout, which suggests range a possible range expansion move on the upside post the narrow band trading activity.

Traders are recommended to Buy SRF above Rs1620 with SL of 1585 for a target of 1705.

BPCL: BUY above Rs 650| Stop Loss Rs 625, Target Rs 700

Failure to sustain above the upper-end of the three-digit Gann channel ensured a strong reversal. Thereafter, it began the process of under-performance against the strength in the benchmark index.

However, BPCL found some respite around its 187-DMA. Also, the weekly chart suggests that the stock has taken support at its 35-WMA. The presence of Gann number (i.e. 625) and multiplication of 180 degrees by applying a square of 9 from the significant top of Rs733 has ensured an exhaustion of the downtrend.

The action post the sharp decline can be best describe as a process of consolidation. It is currently attempting to break above the recent sideways movement between Rs620-650.

A move Rs650 would not only ensure breakout from sideways consolidation but also the resumption of a long-term uptrend. Historically, the stock tends to provide retracement to its 35-WMA before resuming its upmove.

So recent downside has resulted in a good opportunity to accumulate the stock. Traders can look to buy BPCL above Rs650 with a stop loss of 625 for a target of Rs700.

LIC Housing Finance: BUY| Stop Loss Rs 577, Target Rs 635

LIC Housing Finance has underperformed its peers within the housing finance space in the last few weeks. However, a move above Rs577 in this week’s trade suggests that the stock is likely to catch up on the lost time.

Since December 2016, it was facing hurdle around Rs577. On three occasions, the stock retreated lower unable to cross above the same. However, short-term charts indicate a breakout from the Ascending triangle pattern after several attempts also the stock has confirmed a close above the midpoint of Gann channel (i.e. 577).

Back to back confirmation on the multiple time frame corroborates our positive view in the counter. By applying price projections on the recent move, it has the strength to continue the momentum towards Rs630-635 in the medium term.

Based on above rationale, we recommend a buy on LIC Housing Finance and it is imperative to maintain a stop loss of Rs577 to protect the downside.

(The author is Head – Technical Research, IIFL Wealth & Asset Management. Views and recommendations given in this section are the analysts' own and do not represent those of Moneycontrol.com. Please consult your financial adviser before taking any position in the stock/s mentioned.)
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