By Pritesh Mehta
After days of the sideways movement, Nifty gave first sign of feebleness after it closed below the three-digit Gann number of 9,160 for the first time since 29th March 2017.
However, a confirmation of a close below the same is required to ensure a change in orbit towards 9,010. Meanwhile, BankNifty is acting like a lone warrior after posting a weekly rally of 1.1 percent as it continues to trade above the four-digit Gann support of 21,400.
Recent outperformance of BankNifty has restricted the decline in the markets. It certainly holds the key in deciding the next leg of the journey of the index.
Post the five weeks of consolidation at the top and lack of momentum to carry the index past 9,300 suggests that market is missing the much-required ammunition.
By the end of Monday’s session, the index will give a clear signal whether the markets are sustaining at current levels or not.
Top five ideas to buy this coming week which can give a return up to 14 percent upside in short term:
A rally of 3 percent in Thursday’s trade suggests that the stock is attempting to breakout from a flag pattern. In Thursday’s session, it made a high of Rs 344 before settling the week at Rs 335.
Since the first week of April 2017, the stock had been trading in a narrow band of Rs 318-340. However, despite sideways movement, it continued to trade above its 20-DMA.
A potential breakout above Rs 345 could pave the way for a smart upmove in the medium term. Earlier in March 2017, the stock provided a strong breakout from base building pattern, which suggests that the stock is in a strong uptrend.
Every consolidation or a decline is providing a buying opportunity. Breakout from flag consolidation is likely to ignite buying momentum once again. Traders are advised to buy Dishman Pharma above Rs 335 with a stop loss of Rs 318 for a target of Rs 370.
Tata Steel: SELL| Target Rs 420| Stop Loss Rs 485| Return 9.2%
Since March 2017, on numerous occasions, Tata Steel has failed to sustain above Rs 500. Failure to sustain above the midpoint of Gann channel i.e. 485 has eventually resulted in a sharp reversal in Thursday’s session.
Harmonic studies suggest that the stock has reversed from PRZ (potential reversal zone) of a bearish crab pattern on the weekly chart. On the short-term chart, it has also broken down below the short-term ascending trendline support.
Potential breakdown from triple top pattern suggests that multiple supply points are seen on the upside. And a move below Rs 465 could lead to a sharp decline.
Such back to back confirmation on short term and medium term chart supports our shorting argument at current levels and provides better risk-reward ratio to. Based on above rationales, we advise traders to short Tata Steel Apr Futs below Rs 465 with a stop loss of Rs 485 for a target of Rs420.
GSPL: BUY| Target Rs 195| Stop Loss Rs 160| Upside 14%
After being in a phase of consolidation at the top of its rally, it finally staged a breakout on the upside. It is showing the trait of a stock which is in a strong uptrend since March 2014.
Since last eight weeks, the sideways consolidation at the top of its trend can be termed as bullish consolidation. The outcome of such sideways movement are dealt positively during an uptrend.
Moreover, it continues to trade above its 35-WEMA. Fresh breakout was seen in Thursday’s trade from the recent sideways activity.
We expect the stock to see follow-up buying post a breakout session, suggesting a strong movement on the upside in the medium term. Based on above parameters, we recommend a buy on GSPL above Rs171 with a stop loss of Rs160 for a target of Rs 195.
SRF: BUY| Stop Loss Rs 1655| Target Rs 1765| Upside 4%
SRF had been on a downward trend since the third week of October 2016 after forming a double top. The decline gained traction as it made a low of Rs 1,351, resulting in a fall of Rs 600 in a matter of one month.
That decline could easily be termed as a correction in a bull market for SRF as the stock found support around its 61.8% retracement of its previous upmove and the same also coincides with the support of its upward sloping trendline which is in place since March 2016.
Gradual recovery thereafter has taken shape of an upward sloping channel on the short-term chart. In Thursday’s session, it staged a breakout from this channel. Also on the broader charts, it confirmed a breakout from a downward sloping trendline, suggesting that a big move is lurking on the horizon.
Traders can buy SRF above Rs 1,690 with a stop loss of Rs 1,655 for a target of 1,765.
Vedanta: SELL| Target Rs 220| Stop Loss Rs 256| Return nearly 10%
Failure to sustain above mid-point of gann channel has led to a sharp reversal in Thursday’s session. Action since the second week of February 2017 can be described as rangebound consolidation at the top. The point of polarity support around Rs250 was also breached this week.
Breakdown from rising trendline on the broader chart has also contributed to weakness. Signs of distribution were clearly visible since the first week of April 2017. With fresh breakdown, the selling pressure is likely to intensify, which will confirm a long term breakdown in the counter.
The stock has also closed below its 13-WEMA in this week’s trade which supports selling argument. Based on above-mentioned parameters, we recommend short in Vedanta April Futs below Rs245 with a stop loss of Rs256 for a target of 220.
Disclaimer: The author is Head of Technical Research – IIFL Wealth & Asset Management. The views and investment tips expressed by investment experts on moneycontrol are their own and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.