The uncertainty period seen during the first week of March (which led to sideways consolidation) appears to be a distant memory. Ever since the outcome of UP state elections; it has been the case of no looking back for Indian equities; particularly for NSE Mid-cap 100 index.
Since 14th March 2017, the midcap index has rallied by more than 7%, thereby outperforming Nifty index (up by more than 3%). The recent price performance shows that select index heavyweight stocks are taking the index higher (RIL, HDFC, and SBI) while stocks from broader markets are making fresh breakouts and witnessing follow-up buying.
In Thursday’s trade, Nifty opened lower tracking weakness in US markets. However, it lacked momentum on the downside as it defended Wednesday’s low.
Posting a recovery from low of 9,219, it confirmed a close above the midpoint of the four-digit Gann channel (i.e. 9217). The first line of defense as per Gann rule of 8 also appears at 9,210 which should be considered as trailing stop loss on the long positions in the index.
Here is a list of top five trading ideas based on technical parameters for short term:
ACC: BUY| Target Rs 1580| Stop Loss Rs 1440| Upside 6%
From the peak of Rs1,736, the stock went through a sharp decline and made a low of Rs1,257 in November 2016. A breakdown from upward sloping channel contributed to this decline.
However, ascending trendline support since 2013 came to the rescue as the stock began a phase of gradual upmove. Current chart structure suggests a potential harmonic set-up of a bearish bat.
Moreover, recent momentum has also ensured a move above the three-digit Gann number of Rs 1,450, suggesting that the stock has shifted the orbit on the upside. It is currently in the process of forming the last leg of the above-mentioned pattern, which suggests a parabolic move on the horizon.
Also, it has registered a close above its 20-WEMA which acted as a point of a reversal back in February 2017. Based on above rationales, we recommend a buy on ACC above Rs1,480 with a stop loss of Rs1,440 for an upside target of Rs,1580.
Siemens: BUY| Target Rs 1,455| Stop Loss Rs 1240| Upside 12%
Siemens has staged a breakout from a downward sloping trendline connecting the previous peaks. It also resulted in a move above its 61.8% retracement (from Rs1,353 to Rs1,012) as well as it 100-WMA. On a longer time frame, it suggests the beginning of a new cycle.
Post the breakout move on 14th March 2017, the stock has not given a close below the four-digit Gann number of 1225, suggesting that it is moving in a new orbit on the upside. Earlier, the peak of Rs1,560 in August 2015 resulted in a correction for the stock.
The point of Polarity support between Rs970‐1,000 provided some respite in March 2016. Ratio chart of Nifty Infra index against the Nifty index shows it is currently on the last leg of bearish bat pattern, which suggests strong move within this sector in the near term.
Based on above rationales, IIFL recommends a buy above Rs1,300 with SL of Rs1,240 for a target of Rs1,455.
Cummins India: BUY| Target Rs 1030| Stop Loss Rs 920| Upside 7.4%
The phase of consolidation after a sharp decline suggests exhaustion of selling pressure. Back in August 2015, it had made a peak of Rs1,248 and went through a sharp correction, unable to sustain above the four-digit gann number of 1225.
The underperformance was in place for 2016. However, it took support at its 187-WMA and began a process of gradual recovery. The short-term chart is suggesting a breakout from a bullish head & shoulders pattern in last week of March 2017 and it is currently sustaining above the neckline of the pattern which suggests strength in the counter.
A close above Rs961 would lead to a shift in the orbit on the upside. The pattern of higher lows on the higher time frame keeps the positive structure intact. Keeping in mind, above mentioned parameters, IIFL recommend a buy on Cummins above Rs955 with a stop loss of Rs920 for a target of Rs1,030.
DLF: BUY| Target Rs 170| Stop Loss Rs 150| Upside 9%
After being in a phase of consolidation at the top of its rally, it finally staged a breakout on the upside. It is showing the trait of a stock which is in a strong uptrend since December 2016.
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 are dealt positively during an uptrend.
Moreover, it continues to trade above its 20-EMA. Fresh breakout was seen in Thursday’s trade from the recent sideways activity. Nifty realty index is showing signs of revival after a prolonged major underperformance vs Nifty.
Ratio chart of Nifty Realty index vs Nifty indicates that ongoing rally in Realty stocks are likely to continue. DLF appears to be best-placed stock from the entire space and is likely to see follow-up buying.
Based on above parameters, IIFL recommends a buy on DLF above Rs156 with SL of Rs150 for a target of Rs170.
Jindal Steel: BUY| Target Rs 147| Stop Loss Rs 126| Upside 11%
A rally of 7 percent in Thursday’s trade ensured that the price managed to close above the resistance area of Rs131, thus signaling bullish breakout from the Flag pattern. Since the first week of March 2017, the stock had been trading in a narrow band of Rs131-115.
However, despite sideways movement, it continued to trade above its 20-DMA. 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 Rs132 with a stop loss of Rs126 for a target of Rs147.
Disclaimer: The author is Head of Technical Research – IIFL Wealth & Asset Management. 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.
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