Podcast | Accumulate Nifty with a target of 11,000 and stop-loss of 10,600

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Nandish Shah

The Nifty fell more than 50 points from its intraday high on Monday to end the day with gains of 19 points. It finally closed at one-month high of 10,786.

Last week, the index surpassed crucial resistance of the previous top placed at 10,736 and confirmed the higher top and higher bottom formation on the daily charts.

It is trading comfortably above its 20, 50, 100 and 200-day daily moving average indicating a bullish trend in the short to medium term. Oscillators like relative strength index, directional movement indicator and moving average convergence divergence have been showing strength on Nifty and Bank Nifty charts, indicating a possibility of more upside from current levels.

Midcap and smallcap indices have formed a bullish hammer candlestick pattern on the weekly charts. The advance-decline ratio was also positive for the fourth day in a row. It’s the first time after February (February 7-12) where the ratio was positive for four straight days in a row.

Midcap and smallcap stocks, which were underperforming benchmark indices since the start of this year, are now likely to outperform in days ahead.

In the derivative segment, we have seen long positions being built in the Nifty during the last few days from lower levels. The Nifty put call ratio after falling sharply to 1.33 levels last Tuesday recovered sharply to 1.54 on Monday. This rise in PCR is largely on the back of put writing at 10,600 and 10,700 levels, which indicates that 10,600 is likely to act as strong support over the next few days.

On the higher side, the Nifty is likely to face resistance in the vicinity of 10,950-11,000 levels where calls have been written.

Our advice to investors would be to accumulate long positions in the Nifty with a stop-loss of 10,600 and an upside target of 10,950-11,000.

Here is a list of top three stocks that could return up to 10 percent in the short term:

Quess Corp Ltd: Buy| LTP: Rs 1,198| Target Rs 1,300 | Stop-loss: Rs 1,140 | Return 8.50%

After forming multiple bottoms around Rs 1,150 levels, Quess Corp has given a bullish trendline breakout on the daily chart with higher volumes by closing above the downward sloping trendline, adjoining the highs of 09-May-2018 and 01-June-2018.

It has also given a breakout on the daily chart by closing above the previous resistance level of Rs 1,178 level to close at one month high. The short-term moving averages are trading above long-term moving averages indicating the stock is in an uptrend for the medium-term.

The momentum indicators and Oscillators like RSI and MACD are showing strength in the stock. Therefore, we recommend buying Quess Corp for the upside target of Rs 1,300, and a stop loss below Rs 1,150.

TAJ GVK Hotels & Resorts Ltd: Buy| LYP: 230| Target: Rs 250 | Stop-loss: Rs 218 | Return 9%

Taj GVK has given a breakout on the daily chart on Monday with a jump in volumes to close at a one-month high. The stock Price has also given a bullish downward sloping trendline breakout by closing above the downward sloping trendline, adjoining the highs of 24-April-2018, 17-May-2018, and 30-May-2018.

The stock price is trading above its 5, 20 and 200-DMA indicating a bullish trend for the short to medium-term. An oscillator like RSI is also showing strength in the stock for the short to medium term.

Therefore, we recommend investors to buy TAJ GVK for the upside target of Rs 250, keeping a stop loss below Rs 218.

Jamna Auto Industries Ltd: Buy| LTP: Rs 94| Target: Rs 103 | Stop-loss: Rs 88 | Return 10%

Jamna Auto is one of the strongest stocks in the auto space, which has been outperforming during the recent correction. After some running correction, it has closed above 20-day SMA on Monday with a sharp rise in volumes, indicating a resumption of an uptrend.

The stock price is also on the verge of giving bullish breakout from the falling channel on the daily chart. The short-term moving averages are trading above the long-term moving averages indicating the stock is in an uptrend for the short to medium term.

Therefore, we recommend buying Jamna Auto for the upside target of Rs 103, keeping a stop loss placed below Rs 88.

Disclaimer: The author is Technical & Derivatives Analyst at HDFC 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.