Aditya Agarwal
The Nifty saw mammoth buying interest during the initial hour of trade on Monday owing to outcome of the Karnataka exit polls. In that optimism, it surpassed the 10,900 mark and hit an intraday high of 10,929.20.
However, such a move proved to be short-lived as the index surrendered all its gains and eventually formed a Shooting Star candlestick on the daily chart. Post that, we saw follow-up selling during subsequent trading sessions.
On Thursday’s session, the Nifty closed below its daily nine-day exponential moving average (EMA). Also, the hourly relative strength index (RSI) (14) broke the support level of 40.
Going forward, Monday’s high of 10,929.20 will act as a strong hurdle. It will be a daunting task for bulls to cross this level immediately, whereas the near-term hurdle is seen near 10,790 levels. On the flip side, 10,600 will act as an immediate support below which the Nifty is likely to correct till 10,535 levels.
Options data indicates a rangebound move for indices from the short- to medium-term perspective. On the higher side, call writing at 10,800 will continue to act as strong supply zone for the Nifty, whereas at the lower end, put writing at 10,600 will prove as immediate support for the index.
However, if the Nifty breaks 10,600 and sustains below that, selling pressure may intensify and that can drag the index below 10,500 in the short-term.
Here is a list of three stocks that could give up to 10 percent return in the short-term:
Colgate Palmolive India Ltd: Buy around Rs 1,168 – 1,160| Target: Rs 1,250| Stop loss: Rs 1,105| Return 6.3%
Looking at the weekly chart, the stock has been consolidating in a range of Rs 1,170 to Rs 1,006 since several months but managed to break the upper band of consolidation recently to hit a fresh all-time high of Rs 1,189.70.
The said breakout was also supported by rising volumes which is a bullish sign. The weekly RSI (14) broke the trend line drawn from the top of June 30, 2017.
Hence, we advocate traders to accumulate this stock in a range of Rs 1,168 to Rs 1,160 with a price target of Rs 1,250, and a stop loss should be placed below Rs 1,105.
Bharat Forge: Sell around 735 – 745| Target: Rs 680/650| Stop loss: Rs 775| Return 10%
Looking at the weekly charts, the stock is struggling to surpass its previous all-time high placed at Rs 798 and formed a lower top during early May 2018.
The weekly RSI (14) is struggling to cross 60 levels which is a bearish indication. On an hourly chart, momentum indicators suggest that the stock is poised for a further correction.
Hence, we recommend traders to build a short position in the range of Rs 735 to Rs 745 with a price target of Rs 680 and Rs 650 respectively. A stop loss should be placed above Rs 775 on a daily closing basis.
Tata Steel Ltd: Sell around Rs 610 – 616| Target: Rs 555| Stop loss: Rs 634| Return 9%
After forming multiple bullish divergences on the daily chart, the stock has seen a decent pullback. It rose to Rs637 levels recently which coincides with the daily 200-SMA.
In line with our expectations, the stock took a sharp turn and corrected towards Rs 602. The daily RSI (14) is struggling to cross 60 levels. Also, the daily chart resembles a false breakout from triangle pattern which is a bearish sign.
Hence, we recommend traders to go short in a range of Rs 610 to Rs 616 with a price target of Rs 555. A stop loss should be placed at Rs 634 on a daily closing basis.
Disclaimer: The author Head Technical Research, Way2Wealth Brokers Pvt. 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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