Going ahead, buy on dips strategy in the stocks will provide better risk-reward opportunity, Centrum Broking's Jay Purohit tells Moneycontrol.
Nifty is hovering around its strong resistance zone of 10200-10230 and a sustainable move above the same may result into continuation in ongoing optimism towards 10450 – 10500 levels in coming weeks, Jay Purohit, Technical & Derivatives Analyst at Centrum Broking Limited said in an exclusive interview with Moneycontrol's Kshitij Anand.
It has been a good week for traders, Nifty rose to a fresh record high. Do you expect new highs ahead of Diwali?
The last couple of weeks have been good for the markets as the Nifty rallied piercingly to register a new ‘all-time high’ of 10191.90 before the Diwali. After a sharp correction in last two weeks of September, the steep rally was quite surprising for most of the participants.
On Wednesday, we saw the menacing move in the index; but, the market is in no hurry to provide a much-awaited correction. The Nifty made ‘Higher Highs’ every day in last 10 trading sessions and thus showed tremendous strength.
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At the current juncture, Nifty is hovering around its strong resistance zone of 10200-10230 and a sustainable move above the same may result in continuation in ongoing optimism towards 10450 – 10500 levels in coming weeks.
On translation of weekly charts and monthly charts and its implications.
Due to decent rally in the last couple of weeks, the Nifty negated the bearish implication of a ‘Bearish Engulfing’ pattern on weekly chart. The Nifty is trading in a broader range of 500 points from last three months.
The index is moving in the vicinity of a ‘Broadening’ pattern on the daily chart and currently trading around the higher end of the mentioned pattern. However, if we look at the weekly chart of Sensex, the consolidation phase of last three months has resulted into formation of a ‘Bullish Flag’ pattern on weekly chart.
At the current juncture, the Sensex is on the verge of giving breakout from the same. A close above 10200 – 10230 zone in Nifty and 32600 – 32700 zone on Sensex would extend this rally in coming weeks.
At the same time, ‘RSI’ oscillator is showing series of negative divergences on the weekly chart, which makes us a bit cautious on the index.
On the flipside, strong support for the Nifty is placed in the zone of 9950 – 10000. Hence, till the time, Nifty doesn’t cross the resistance level, it is expected to trade in the range of 9950 – 10200.
What should be the strategy for investors in the coming week – buy on dips, sell on rallies?
Though the Nifty is trading in the sideways direction from the last couple of months, stocks are outperforming the market and are fetching better returns. Thus, investors are advised to adopt stock-centric approach with a bullish view.
Going ahead, buy on dips strategy in the stocks will provide better risk-reward opportunity.
Any stocks which are looking interesting based on technical parameters?
At the current juncture, we are advising our clients to buy following stocks with 2-3 months trading horizon.
Parag Milk Foods: CMP: 262.80 | Stop Loss Rs 244 | Target Rs 300 – 315 | Return 20%
Post the listing in May, 2016, the stock has rallied by around 50 percent within three months. However, the stock has started correcting and has taken support in the zone of Rs 200 – 205.
Last week, the stock gave a breakout from the ‘Falling Trend Line’ and managed to sustain above the same. Volumes were also healthy on the breakout, which is a positive sign for the counter.
Also, the momentum oscillator ‘RSI - Smoothened’ and ‘MACD’ are placed positively on both the daily and weekly charts which is an indicating of strength in the counter.
Considering above technical evidence, we are expecting a continuation in the ongoing momentum towards Rs 300 - 315 levels in the coming weeks. Thus, we advise traders to buy the stock at current juncture and on declines to Rs 253 with a stop-loss of Rs 244 on a closing basis.
SBI: CMP: 252.10 | Stop Loss Rs 238 | Target Rs 278-285| Return 13%
SBI has drastically underperformed the broader market in the recent past. However, the stock has taken support at around 38.20 percent retracement level (250) the entire up move from Rs 145 to Rs 314.80 on the monthly chart.
At the same time, we are witnessing a formation of Bullish Harmonic Pattern called ‘Bullish Shark’ on the daily chart. The Potential Reversal Zone of the mentioned pattern is placed at Rs 242 – 247 levels.
The ‘200 EMA’ on daily chart also coincides with the mentioned PRZ. Since the momentum oscillators are showing initial sign of reversals on daily and weekly chart, we advise our clients to buy the stock at current levels and on declines to Rs 245 for a target of Rs 278 and Rs 285. A stop-loss for the trade should be placed at Rs 238 on a closing basis.
Suven Life Sciences: CMP Rs 198 | Stop Loss Rs 177 | Target Rs 235 – 245 | Return 23%
After taking support around the 61.80 percent retracement levels of the entire up move in February 2016, the stock has started moving in the sideways direction. From last few months, the stock is forming ‘Higher Lows Lower Highs’ on the weekly chart.
The ongoing consolidation phase of last eighteen months has resulted in formation of a ‘Triangle’ pattern on weekly chart. Currently, the stock is giving breakout from the mentioned pattern with healthy volumes.
The ‘RSI’ oscillator on weekly chart managed to cross its strong hurdle of 60 levels and thus showing strength in the counter. Considering above technical evidence, we are expecting the continuation in the ongoing momentum towards Rs 235 - 245 levels in the coming month.
Thus, we advise traders to buy the stock at current juncture and on declines to Rs 190 with a stop-loss of Rs 177 on a closing basis.
Punj Lloyd: CMP : 20.90| Stop Loss Rs16.50| Target Rs35 - 42| Return 50-100%
The stock is moving in a broader range of Rs17 – 29 from the last couple of years. In the mentioned consolidation phase, we witnessed good buying interest among the market participants as the volumes were quite high in the bounces than that of corrections.
On the weekly chart, we are witnessing that prices are making matching lows; however, ‘RSI’ oscillator is making higher bottoms, indicating accumulation and early signs of bullish breakout in the counter.Thus, we are considering this counter as a ‘Dark Horse’, which has a potential to double from the current levels by next Diwali. Thus, we advise investors to accumulate the stock at current juncture and on a decline to 19 with a stop-loss of 16.50 on a closing basis.