By Pritesh Mehta
It is becoming a regular theme for the markets wherein the index does not get follow through momentum on the downside after a bearish candle and also it is unable to build the gains on the upside post a bullish candle.
This inability to follow a trend has resulted in choppiness. However, the events which took place this Tuesday on April 18 has surely confirmed a shift in the orbit on the downside. In a single session, the index broke critical support levels i.e. 9160, 9121 (four-digit gann number) and previous top of 9119 (peak of 2015).
Comeback of last two sessions has provided some relief, but going ahead multiple supply points are seen between 9160-9220. Despite this choppiness, the ace in the hole is Bank Nifty.
The index has lost 0.9 percent so far in this week, but PSU banks relatively outperformed in Thursday’s session. The line in the sand for Bank Nifty is 21,400 (i.e. the three-digit gann number as well as the previous breakout point). A close below the same would contribute towards weakness.
Top five stocks to buy which could give up to 13% return in the short term:
Grasim: BUY| Target Rs 1,250| Stop Loss Rs 1,100| Upside 9%
We are right now in an environment which appears to be rewarding any particular stock. Grasim certainly falls into that category. From December 2016, the stock had staged a strong rally from Rs800 to Rs1,098 in March 2016.
Thereafter, it went into a period of sideways consolidation at the top. This sideways movement faced supply hurdle around Rs1,100. It coincided with four-digit gann number of 1089.
In Thursday’s trade, it confirmed a strong breakout as it staged a rally of 6%. “We expect follow-up action in this counter and the stock could attempt Rs1,250 on the upside,” said Mehta.
It had a strong run-up in December and the same could be replicated in the current move. Based on above rationale, we recommend a buy on Grasim above Rs1,145 with a stop loss of Rs1,100 for a target of Rs1,250.
Jet Airways: BUY| Target Rs 550| Stop Loss Rs 390| Upside 8%
This momentum stock was back in action in Thursday’s trade after going through a period of retracement in the month of April. On the daily chart, it has made a bullish Gartley pattern, which suggests strong follow-up movement on the upside. During the recent corrective phase, it took support at its 35-DMA.
The same also coincided with the midpoint of current gann channel and also PRZ of the bullish Gartley pattern. The confluence of support zones provided a minimum entry point in Jet Airways in Thursday’s morning trade.
Post a rally of 6 percent, we expect the stock to build on recent momentum and attempt the peak seen at the start of the month. Based on above mentioned technical parameters, we recommend a buy on Jet Airways above Rs 510 with a stop loss of Rs 390 and a target of Rs 550.
It had been consolidating at the top after a strong rally between September and March 2017. From last two months, it had been moving sideways between Rs 160 and Rs 141. However, in recent phase of consolidation, the stock continued to find support around its 35-DMA.
On several occasions, it staged a rally in last few weeks from the critical moving average support. In fact, the same is acting as a strong support since the second week of April 2017. Moreover, it continues to trade above the midpoint of current gann channel.
Eventually, this sideways move resulted in an upside breakout. Since it is an up trending stock, traders should always use any phase of consolidation and also breakout from the same to build a long position.
A confirmation of a move above Rs 160 would result in an upside breakout and the stock could attempt Rs 180 in the medium term. Based on above rationales, Mehta recommends a buy on Balrampur Chini above Rs 160 with a stop loss of Rs 152 and a target of Rs 180.
JK Paper: BUY| Target Rs 125| Stop Loss Rs 103| Upside 8%
In Thursday’s trade, it staged a breakout after going through a phase of consolidation at the top of its rally. It is showing the trait of a stock which is in a strong uptrend. It is moving higher along with the support of its 100-DMA since August 2016, wherein every pullback towards this critical moving average has resulted into buying opportunity.
Since last three months, 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 the midpoint of gann channel. Sustenance above the same suggests that the stock is moving in a new orbit. Based on above parameters, we recommend a buy on JK Paper above Rs110 with a stop loss of Rs103 and a target of Rs125.
Voltas: BUY| Target Rs 454| Stop Loss 405| Upside 8%
Voltas had been quite, just consolidating, for last three weeks after a terrific run up from Rs 321 to Rs 425. Recent consolidation has taken shape of a flag on the line chart.
Flags are considered to be a continuation pattern in nature; we expect the stock to replicate the momentum it had between January 2017-March 2017 post a confirmation of a move above Rs 425.
During the period of recent sideways correction, the stock took support at the midpoint of the current gann channel and reversed direction, suggesting that it showing characteristics of an uptrending counter. After a big rally, stocks will go into a hurdle, it will face resistance at higher levels.
This is a normal cycle of stock in a bull market. The recent action could easily be described as consolidation in an ongoing uptrend. Mehta recommends traders to buy Voltas above Rs 420 with a stop loss of Rs 405 and a target of Rs 454.
Disclaimer: The author is Head of Technical Research – IIFL Wealth & Asset Management. The views and investment tips expressed by investment experts on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.