Aditya AgarwalaYES Securities
Bulls made a killing in the year 2017 as Nifty 50 Index rallied by about 29 percent after two years of consolidation.
Following this sharp rally in the previous year; 2018 started on a tepid note as the index is sitting at the upper end of a rising channel placed at 10,780.
Moreover, it is also facing critical resistance at the 161.8 percent Fibonacci extension level of the previous correction (i.e. 9,119-6,825) placed at 10,540.
Failure to cross this Fibonacci extension resistance may trigger corrections in the first half of the year dragging the Index lower to levels of 10,200-9,540 being trend-line support and 38.2 percent Fibonacci retracement level respectively.
However, a sustained trade above 10,540 i.e. 161.8 percent Fibonacci extension level can extend the uptrend to levels of 10,780-11,200 being the upper end of the channels.
Further, the current uptrend is the 3rd impulse wave in the 5 wave Elliott setup. Failure to cross 10,540 can trigger the start of the 4th corrective wave with potential targets of 10,200-9,540.
Moreover, as per rule of alteration 2nd corrective wave was sharp correcting 50 percent of the wave 1 (i.e. 6,825-8,969); therefore wave 4 can be shallow and complex suggesting time and narrow price correction.
The relative strength index (RSI) is also forming a negative divergence suggesting that the 3rd wave is maturing portending to volatile trading sessions.
Top three stocks which are likely to give up to 17% return in 3-4 weeks:
Coal India Ltd: BUY| Target Rs303| Stop Loss Rs250
On the weekly chart, Coal India Ltd. (COALINDIA) is on the verge of a breakout from a Flag pattern suggesting resumption of the bull trend on cards (as indicated on chart). A sustained trade above 269 i.e. neckline of the pattern on higher volumes may trigger a breakout.
On the daily chart, the stock has turned upwards after forming a double bottom affirming bullishness building up. The RSI and MACD are also favoring the bulls. The stock may be bought in the range of 266-270 for targets of 295-303, keeping a stop loss below 250.
Kitex Garments Ltd: BUY| Target Rs356| Stop Loss Rs290
On the daily chart, Kitex Garments Ltd. (KITEX) is on the verge of a breakout from a channel pattern suggesting bull trend reversal on cards. The neckline of the pattern is at 313, a sustained trade above the neckline can trigger a fresh up move.
On the weekly chart, the stock has broken out from a consolidation pattern with healthy volumes affirming bullishness.
The relative strength index (RSI) has turned upwards breaking out of the upper band of the Bollinger Bands suggesting higher levels in the coming trading sessions.
The stock can be bought in the range of Rs305-309 for a target of Rs340-356, keeping a stop loss below Rs290.
Mukand Engineers Ltd: BUY| Target Rs68| Stop Loss Rs52
On the weekly chart, Mukand Engineers Ltd is approaching upper end of the channel pattern triggering a resumption of the bull trend. A sustained trade above 57 can extend the uptrend in the coming trading sessions.
RSI has turned higher breaking out of the Bollinger Bands and MACD has broken out of its trigger line suggesting higher levels. The stock may be bought in the range of 57-59 for targets of 65-68, keeping a stop loss below 52.
Disclaimer: The author is Technical Analyst, YES Securities (I) Ltd. The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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