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Jan 01, 2018 12:00 PM IST | Source: Moneycontrol.com

Top 10 stocks based on technical parameters which could give up to 70% return in 2018

Any decent declines during the year remain to be a good buying opportunity for investors having longer-term horizon. On the downside, 10460 – 10426 are the levels to watch out for.

Kshitij Anand @kshanand
 
 
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The Nifty50 rose by about 29 percent in the year 2017 and if the momentum continues, the index is all set to climb Mount 11K in the year 2018, suggest experts.

Will the history repeat in the year 2018? Well, the answer is a Yes as well as No. Yes, the momentum will continue. And, No because indices might not able to give a similar return of 29 percent in the year 2018.

The Nifty clocked whopping gains of 29% in the calendar year 2017 and probably we can count on the fingers of our one hand such spectacular years in the history of Indian markets. It is still a buy on dips market and investors should use every dip to buy quality stocks.

“Undoubtedly, the year belongs to mighty bulls as we saw massive wealth creation right from the word go. There were a couple of hiccups during the year; but they eventually turned out to be whipsaws as the index kept on enjoying its Bull Run to eventually conclude the year at record highs,” Sameet Chavan, Chief Analyst- Technical Derivatives, Angel Broking Pvt Ltd told Moneycontrol.

“If we look at it from a longer perspective then there is no second thought about the continuation of this Bull Run towards 11000 and beyond. But, we do not expect the journey to be as smooth as it has been throughout this year,” he said.

Any decent declines during the year remain to be a good buying opportunity for investors having longer-term horizon. On the downside, 10460 – 10426 are the levels to watch out for.

There were many such occasion in the past since 1980 when the market has continued to deliver in the subsequent year even after clocking 25 percent plus kind of returns. But, analyst advises investors to remain stock specific and be contrarian in their approach.

“Adopting a contrarian strategy can be better for a bet for the year 2018 which should reward investors in case market turns out to be very volatile and turbulent,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“If we dissect the long-term trends then we will know that this market is staring at a critical resistance level placed around 10,650 and in need of a breakout,” he said.

Mohammad further added that for bigger up moves, the index needs to witness a sustainable breakout above the said level. “In case such a breakout takes place, then bulls can easily take the indices to much higher levels and may even head towards 11,200 levels on the Nifty,” he said.

Here is a list of top 10 stocks which can give up to 70% in the next 12 months:

Brokerage Firm: ICICIdirect

Bharti Airtel: BUY| Target Rs688| Return 29%

The stock recorded a multi-fold rally from March 2003 low of 16 to the December 2007 high of Rs592. The share price of Bharti Airtel retraced 61.8% Fibonacci level of entire four and half years dynamic up move.

Since then it has been consolidating in a broader range of Rs216 – 452 for the past 10 years, advocating healthy price and time correction. The recent developments on price front indicate structural change as it is on the conclusion of the 10 years corrective phase and signal resumption of the primary uptrend.

The breakout was supported by the strong volume of more than double of the 12 months average volume of 10 crore share per month signalling larger participation in the direction of the trend.

As per change in polarity concept, the earlier swing high of 450 would act as an immediate support for the stock. The aforementioned technical evidence suggests that the stock is gearing up for the move to novel orbit.

We expect the share price to surpass the lifetime high of a Rs592 level and head towards Rs688 levels in the long term as it is the measuring implication of range breakout (452-216=236 points) added to the breakout area of Rs452 project upside towards Rs688 (452+236=688).

Axis Bank: BUY| Target Rs640| Return 14%

The consolidation in the broad range of Rs547-480 of the last nine months is approaching maturity as the stock is at the cusp of a breakout from the recent consolidation pattern.

We believe the current consolidation has approached maturity and the stock is likely to resume its prior uptrend.

The share price of Axis Bank after the strong up move in the CY14 has been trading in a range in the last three years while consuming 33 months in retracing just 61.8% of the previous 13 months rally from Rs217 to Rs654 signalling a healthy consolidation and a robust price structure.

The stock has major support around Rs485-490 range as it is a confluence of the long-term trendline support joining the lows since CY14 as can be seen in the adjacent chart and the base of the recent consolidation.

We expect the share price to resolve higher from hereon and head towards Rs640 levels in the medium term as it is the 161.8% extension of the previous up move (Rs425-547) as projected from a recent trough of Rs448, which also coincides with the high of September 2016.

Punjab National Bank: BUY| Target Rs230| Return 34%

The share price of PNB is on the verge of the conclusion of correction in the secondary phase. The last seven years correction has been captured in a well-defined downward sloping channel formation, where the fall from December 2010 highs of Rs280 to lower high of December 2014 of Rs231.

It correspondingly matches with lows of September 2013 of Rs80 followed by March 2016 low of Rs69. On the monthly chart is that the stock witnessed faster retracement where it retraced last six-month descent in solely one month’s up move.

Another important observation is that the stock has recorded highest ever quarterly volumes since March 2004 along with robust price move, suggesting structural change is on cards in the stock and offers a fresh opportunity for investors to ride the next leg of up move.

We expect the stock to find strong support in the region of 140 as it is the value area of key uptrend line connecting May 2016 and October 2017 swing lows.

Based on the aforementioned technical observations, we expect the stock to enter into a sustainable uptrend and head towards the target of Rs230 being the price parity with the previous up move from Rs69 to Rs165 added to the recent trough of Rs129, project upside towards Rs225 which coincide with October 2017 peak of Rs231.

Tata Chemicals: BUY| Target Rs878| Return 20%

In the first quarter of CY17, Tata Chemical logged a resolute breakout from multi-year resistance trend line drawn adjoining June 1996 highs of Rs306 and subsequent highs of January 2008 of 431.

After registering this breakout, share price retested the breakout level and sustained well above it for a couple of months. While analysing medium-term chart we observed conventional up move, as the price continues to form higher high along with strong momentum and the corrections are getting shallower, which resembles ‘Flag’ breakout.

A Flag is a bullish continuation pattern, suggesting that the stock is ready to make new highs. Correspondingly, the quarterly MACD (E-12/26/9) has rallied to highest reading as it continues to make rising peak and trough formation, complementing the price rallies.

The volume behaviour also supports the positive bias in the stock. We believe the stock is attractively poised above the major breakout area and provides a good buying opportunity from a medium-term perspective.

We expect the stock to head towards our target of Rs878 levels in the long term being the price parity of the previous major up move from Rs568 to Rs765 added to the recent trough of Rs681 projects upside towards Rs878.

EIH: BUY| Target Rs183| Return 24%

Post retracement of 50 percent of earlier major fall of January 2008 – August 2013 the share price of EIH limited had been oscillating in a broader range of 91- 137 for more than two years. In the second quarter of CY17, stock logged a resolute breakout above the upper band of the range and has been consolidating above the breakout level in the last three months signaling strength in the breakout and provides fresh entry opportunity.

The sharp rebound from the December 2016 low of Rs91 has seen the stock completely retrace its preceding 24 months down fall (Rs138 to Rs91) in just 5 months, thus confirming a faster retracement.

Faster retracement of the last consolidation highlights the strong demand emerging at the major breakout level. The monthly momentum indicator MACD (E-12/26/9) found support from zero levels and now inching upward indicating strength in the current momentum.

We believe the current consolidation above the breakout area of Rs138 is a positive sign confirming strength in the price breakout as the stock is building a higher base that will act as the launch pad for a further northward journey.

We expect the stock to head towards Rs183 levels in the long term as it is the measuring implication of range breakout (Rs137-91=46 points) added to the breakout area of Rs137 project upside towards Rs183 (137+46=183).

Analyst Name: Pragnesh Jain, Technical analyst, Systematix Shares

Adani Enterprises Ltd: BUY| Target Rs261| Return 57%

The stock formed a Cup & Handle breakout which is a continuation pattern. Formation of the pattern suggests that the stock is likely to continue its uptrend recorded in the year 2017.

The pattern suggests that the stock has upside potential of over 60 percent from current levels. We see the stock hitting Rs261 in the next 12 months. Any dip towards Rs160 can be used as a buying opportunity. Investors can keep a stop loss below Rs140 on a closing basis.

Tata Power Ltd: BUY| Target Rs135| Return 45%

The stock witnessed a Triangle breakout on the monthly charts along with the recent upmove within an upward sloping channel suggest that the stock has potential to hit Rs120 followed by 135.

Investors can use dips towards Rs85 as a buying opportunity with a stop loss firmly placed below Rs78 on closing basis.

ABB India Ltd: BUY| Target Rs1900| Return 35%

The stock has given a triangle breakout after making multiple bottoms near Rs1300 levels. Triangle breakout suggests that the stock has upside potential of Rs1700, followed by Rs1900 with a stop loss firmly placed below Rs1300.

Elecon Engineering Ltd: BUY| Target Rs180| Return 76%

The stock has been trading within a range since 2009. The range breakout at Rs101 along with a monthly, quarterly as well as yearly close above the breakout (on all major time frames) suggests that the stock has upside potential of Rs146 followed by 180.

Investors can use dips towards Rs97 as a buying opportunity with a stop loss below Rs80.

Hexaware Ltd: BUY| Target Rs430| Return 26%

The stock formed a Pole & Flag breakout pattern which is a continuation pattern. A breakout above Rs345 levels will lead to the upside potential of Rs430 with a stop loss placed below Rs314.

Disclaimer: The views and investment tips expressed by brokerage firms 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.
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