Any fall below 9,560 would cause a downside shift continuation in the orbit.
By Pritesh Mehta
IIFL Private Wealth
Stagnation around 9,700 levels in the previous seven sessions and presence of multiple supply points between the levels of 9,700-9,730 finally caused a decline in Thursday’s trade. In the process, Nifty closed below the three-digit gann number of 961(0).
Having said that, Nifty corrective declines are known to retrace 38.2% of the previous up-move (i.e. 9341-9709). On an immediate basis, Thursday’s low of 9,561 is a point of reference, as it coincides with the support of its 21-EMA.
This moving average has been a savior since January 2017. Moreover, support of 5-week EMA is placed near Thursday’s low. The third line of defense as per gann rule of 8 also highlights the criticality of 9,560.
Any fall below 9,560 would cause a downside shift continuation in the orbit. Meanwhile, BankNifty continues to trade above three-digit gann number of 233(00). The same also coincides with previous breakout as well as the support of its 21-EMA.
Top five trading ideas based on technical charts which can give up to 12 percent return in short term:
DHFL: BUY| Target Rs 515| Stop Loss Rs 445| Return 11%
After being in a phase of consolidation at the top of its rally, it finally staged a breakout on the upside in Thursday’s trade. It is showing the trait of a stock which is in a strong uptrend since November 2016.
Prior to recent breakout, it went through a phase of sideways correction as the stock took support at its second line of defense as per gann rule of 8. Thereafter, it provided a gradual recovery and eventually broke past the previous peak of Rs455.
We expect the stock to replicate the momentum it had seen from March to April 2017. Traders are advised to buy the stocks which are breaking out from consolidation pattern at the top.
Based on above observations, we recommend traders to buy DHFL above Rs464 with stop loss of Rs445 for a target of Rs515.
Federal Bank: BUY| Target Rs133| Stop Loss Rs113| Return 11.7%
The stock is currently 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. Federal Bank is moving higher along with the support of its 5-Weekly EMA since January 2017, wherein every pullback towards this critical moving average has resulted into buying opportunity.
Since last six weeks, the sideways consolidation at the top of its trend can be termed as bullish consolidation. The outcome of such sideways movement is dealt positively during an uptrend.
A move above gann number of 121 would also result in a shift in the orbit on the upside. Sustenance above the same would provide the much ammunition for the stock to ascend higher. Based on above parameters, we recommend a buy on Federal Bank above Rs119 with a stop loss of Rs113 and a target of Rs133.
Jindal Steel: BUY| Target Rs140| Stop Loss Rs118| Return 12%
A rally of 3 percent in Thursday’s trade ensured that the price managed to close above the resistance area of Rs125, thus signalling bullish breakout from the Flag pattern.
Since the start of the month, the stock had been trading in a narrow band of Rs125-118. However, despite sideways movement, it continued to trade above its 21-EMA.
Breakout in Thursday’s session has paved the way for smart upmove in the medium term. Earlier in February 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 Jindal Steel above Rs125 with a stop loss of Rs118 for a target of Rs140.
Zee Entertainment: SELL| Target Rs472| Stop Loss Rs521| Return 7%
On the daily chart, the stock has broken down from a Symmetrical Triangle pattern. A negative breakdown from the pattern indicates further downside in the coming sessions. The stock price consolidated within the triangle in the range of Rs496-548 for last six weeks.
This week the stock confirmed a breakdown from the triangle pattern by declining by 3 percent. The stock closed below the lower trendline (support). The daily MACD is in sell mode, whereas the daily RSI has generated a crossover sell signal indicating further weakness.
The stock has already provided a shift in the orbit on the downside by falling below gann number of 529. We recommend traders to sell Zee Ent Jun Futs below Rs507 with a stop loss of Rs521 for a target of Rs472.
Bajaj Finance: BUY| Target Rs1510| Stop Loss Rs1360| Return 7%
After being in a phase of consolidation at the top of its rally, it finally staged a breakout on the upside in Thursday’s trade. It is showing the trait of a stock which is in a strong uptrend since January 2017.
A move prior to recent breakout could be termed as flag pattern. Flags are considered to be a continuation pattern in nature; we expect the stock to replicate the moment it had seen in April.
Gann analysis suggests that the stock is in a strong uptrend and in Thursday’s trade it confirmed a shift in the orbit on the upside.
Since it is an up trending stock, traders should always use any phase of consolidation and breakout from the same to build longs. Traders can buy Bajaj Finance above Rs1,409 with a stop loss of Rs1,360 and a target of Rs1,510.Disclaimer: The author is Head of Technical Research at IIFL Private Wealth. 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.