"We expect the stock to resume uptrend after the current consolidation breakout and head towards Rs 6100 in the medium term as it is the confluence of the breakout implication and 123.6 percent external retracement of September 2017 – February 2018 decline placed at Rs 6095," says Dharmesh Shah, Head Technical, AVP at ICICIdirect.com.
By Dharmesh Shah
The Nifty50 during the previous week traded with positive bias and has maintained higher high and higher low in the weekly chart. In the process, it registered a resolute breakout above the falling channel containing the entire corrective price action since mid-February 2018 signalling a reversal of the corrective trend and resumption of the positive momentum.
The current pullback is larger in magnitude compared to the previous two pullback signalling sign of improving market structure.
We expect the index to head towards 10,480 regions which were the high of mid-March 2018. We expect focus will now shift to stock specific action as we enter into Q4 earning season; however, broader markets to extend relative outperformance while index remains in consolidation mode.
In the past two weeks, the index has rallied almost 475 points from the March low (9,952), leading the stochastic oscillator to trade in the overbought zone (currently at 90), indicating that the possibility of a breather at higher levels cannot be ruled out.
Thus, a close below Wednesday’s low of 10,355 would lead to pause in an ongoing uptrend. This may lead the index to enter a consolidation phase to cool off overbought conditions.
However, overall bias in the index remains positive hence, any breather towards 10,200 should be used as an incremental buying opportunity.
Bajaj Finserv: BUY | CMP: Rs 5420| Target: Rs 6095| Stop loss: Rs 5190 | Return: 12%| Time frame: 6 months
Bajaj Finserv after registering life high of Rs 5790 during September 2017, has entered a secondary corrective phase as it discounted excesses built in the previous rally and factored in concerns over rising bond yields etc.
In the current week, the share price resolved out of past six month’s basing pattern, signalling the end of the corrective phase and commencement of fresh up leg, thus providing fresh entry opportunity.
The price decline from a lifetime high and subsequent consolidation phase over the past six months fulfill all properties of a corrective pattern within a primary uptrend as it retraced the preceding four-month rally just by 50 percent over seven months indicating robustness in the price structure
Significantly, the consolidation over past six months anchored at the key support of Rs 4800 as it is the confluence of:
a) 50 percent retracement of the previous up move (Rs 3801-5790)
b) The long-term rising 52 weeks EMA, which has been held since CY 2013
The stock has immediate support at Rs 5200 as it is the 61.8 percent retracement of the most recent rally.
We expect the stock to resume uptrend after the current consolidation breakout and head towards Rs 6100 in the medium term as it is the confluence of the breakout implication (Rs 5450-4800= Rs 650 points added to breakout of Rs 5450) and 123.6 percent external retracement of September 2017 – February 2018 decline (Rs 5790-4500) placed at Rs 6095.Disclaimer: The author is Head Technical, AVP at ICICI Direct.com Research. The views and investment tips expressed by investment experts 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.Are you happy with your current monthly income? Do you know you can double it without working extra hours or asking for a raise? Rahul Shah, one of the India's leading expert on wealth building, has created a strategy which makes it possible... in just a short few years. You can know his secrets in his FREE video series airing between 12th to 17th December. You can reserve your free seat here.