Moneycontrol
Dec 08, 2017 05:39 PM IST | Source: Moneycontrol.com

Nifty likely to face resistance at 50-DMA; 3 stocks which can give up to 10% return

Climbing back the hill is not going to be an easy task as there are multiple hurdles that await the Nifty, first is the 50 days moving average (DMA) of 10,190 and 21-DMA of 10,250.

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Hadrien Mendonca

IIFL

Just when we thought that market is all set for another down day, indices staged a smart come back on Thursday.

After opening with a positive gap, Nifty never turned back as it gained momentum throughout the day thanks to a strong bout of buying witnessed in the metals, auto and realty stocks.

The Nifty did miss out a chance of trend reversal after forming a 'Doji' pattern on December 5, 2017. However, the index finally staged a solid recovery and has recouped over 100 points in a single session.

Hadrien Mendonca
Hadrien Mendonca
Senior Technical Analyst|IIFL

    Lower time frame chart analysis indicates that Nifty has shown early signs of a higher top higher bottom formation. Having said that, climbing back the hill is not going to be an easy task as there are multiple hurdles that await the Nifty, first is the 50 days moving average (DMA) of 10,190 and 21-DMA of 10,250.

    Here is a list of stocks that could deliver up to 10% return in the short term:

    Cyient Limited: BUY| Target Rs650| Stop Loss Rs570| Returns 10%

    Cyient has been in a wide trading band for over a long period of time, in fact, two years now. The stock faced stiff resistance between Rs550-565 three times in two years constructing the horizontal trend-line.

    However, after a long drawn struggle, Cyient has finally broken out of an “Ascending Triangle pattern” on the weekly charts. Cyient has also constantly held above the 89-weekly moving average which suggests, that the stock has very strong support near that level.

    Based on above observations, we recommend a buy on Cyient Limited with a stop loss below Rs570 and a target of Rs650.

    Vedanta (VEDL): BUY| Target Rs305| Stop Loss Rs277| Returns 7%

    VEDL has been in a declining mode for the past six weeks and has now gradually arrived at its long-term 200-DEMA. The stock has formed a Doji pattern on the daily chart on December 6, 2017, and bounced back sharply.

    An early sign of trend reversal is on the cards and it is likely to emerge as a good opportunity to latch on to this metal heavyweight for a decent 7 percent upside. Every long position is advised to keep a strict stop loss at Rs 277.

    Motherson Sumi: BUY| Target Rs400| Stop Loss Rs354| Returns 9%

    The stock is a solid up trending one and is trading in a higher top higher bottom structure. Since September lows, the stock has held well above the 50 as well as the 21-DEMA convincingly.

    After moving in a sideways pattern for over last five weeks, Motherson has finally broken out from a consolation phase.

    The price outburst has also been accompanied by a decent uptick in traded volumes. A close above the previous peak of Rs 373.65 will further accentuate our bullish stance on the stock.

    We believe the stock has potential to rally towards its target of Rs 400 in the near term. The stop loss should be kept below Rs354.

    Disclaimer: The author is Senior Technical Analyst, IIFL. 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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