Shrikant Chouhan
Kotak Securities
Based on the daily charts, we are of the view that, Nifty has completed a trending selloff at 11,250 and has started a corrective upward move.
Corrective upward moves, usually complete their structure above the high of the previous (immediate) highest levels, which is placed at 11,603. The wave should end somewhere between the range of 11,600 and 11,760, and then we could witness Nifty moving down gradually to form a similar or lower bottom, below the level of 11,250.
The ideal strategy should be to reduce weak long positions above 11,600, but the sectorial rotation is not ruled out. In the previous week, sugar sector was the outperforming sector. Price and volume action is suggesting us that the current up move is here to stay.
Volume in many scripts of this sector was abnormally high. Especially, companies related to, ethanol have witnessed huge buying interest with a spurt in volumes on Friday. For the coming week, we would like to cover few of these stocks in detail.
For investors, the sugar sector has relatively underperformed since 2006. However, those who bought them during stressed periods and sold in the most optimistic times, have earned multifold returns in a very short span of time.
Very few of these stocks have offered significant returns and have held at high levels for a considerable period for e.g. Upper Ganges, Oudh Sugar, and Andhra Sugar.
Today, we are going to cover those stocks which are still trading at the lower boundary of the broader trading range and have significant upside in coming months.
Here is a list of top three stocks which could give 100-250% return in the next 1 month:
Bajaj Hindusthan: Buy | LTP: Rs 8.52 | Target: Rs 30 | Stop Loss: Rs 5 | Time 2-4 months | Return: 250%
From 2003 to 2006, the said stock has delivered 140x returns. It rose from Rs 3.40 to Rs 484 in a span of just 3 years. However, since then the stock has remained under gradual weakness and has crashed to almost same levels in the month of July 2018.
However, volume and price action of the last few months is suggesting us that the stock has entered into bullish consolidation phase (Higher bottom on the Monthly chart and Inverted head & shoulders) on daily charts.
It could lift the stock to a minimum Rs 12 and maximum of Rs 30 in the next 2-4 months. Investors should keep a stop loss at Rs 5 for all long positions.
Dhampur Sugar Mills: Buy| LTP: Rs 117 | Target: Rs 250 | Stop Loss: Rs 70 | Time 2-4 months | Return 113%
In the year 2017, the stock has managed to surpass the highs of 2006, which was placed at Rs 271. However, the move remained short-lived and the stock corrected sharply, by almost 80 percent from the highs of Rs 330.
Starting May 2018, the stock has been trading in a tight range, leading to a bullish breakout in the previous week. We expect the stock to test Rs 200-250 levels in the next 2-4 months. Investors can keep a stop loss placed at Rs 70 for all long positions.
Praj Industries: Buy | LTP: Rs 107.45 | Target: Rs 190-225 | Stop Loss: Rs 80 | Time 2-4 months | Return 70-110%
The stock has been forming a rectangle formation since 2009. The stock witnessed a dream run between 2003 and 2007. However, since then along with other stocks, it cracked to the extreme level of Rs 50 in the year 2009.
The broader formation is suggesting us that the stock has formed a rectangle formation between Rs 122 and 50. If the stock breaches Rs 125 then we expect a technical break out, which could lift the stock to Rs 190-225 levels in the next couple of months.
Investors should keep a stop loss below Rs 80 for all long positions.
Disclaimer: The author is a senior VP (technical research), Kotak Securities. 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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