Avoid creating shorts at current levels; 2 stocks which could give up to 20% return

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26 Aug, 2025 12:21

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Dharmesh Shah

The equity benchmarks continued to trade with high volatility with corrective bias as it declined for the third consecutive week.

However, the index seems to be witnessing pullback effort in the last two trading sessions near the support area of 10,000 as the placement of the daily stochastic at an oversold territory and the daily 14-period’s RSI showing a positive divergence indicates supportive effort at lower levels.

We expect the index to find a breather around key value area of 10,000-9,900 amid a rise in volatility owing to FOMC rate decision and witness a pullback towards 10,450 in the coming weeks.

Thus, we advise investors to avoid creating aggressive shorts at the current juncture and instead look to accumulate quality stocks in a staggered manner for the medium-term.

Structurally, despite the current sell-off the broader market continues to hold recent lows, indicating resilience of broader markets.

Current developments on the price chart signal that the index is trading in a second phase after a robust rally of over 37 percent since January 2017.

This consolidation forms a part of the larger uptrend. Hence, we believe value buying will outstrip supply as the index approaches its major value area of 9,900-10,000 and form a base.

The 10,000-9,900 region makes a key value area for the index based on the following observations:

• Since CY10, in four instances, intermediate corrections following seven to nine weeks of consecutive higher high lows, measured 9-12 percent, leading the way to a resumption of the uptrend. In the present scenario, after seven weeks of higher high low (towards January 2018 high), a similar magnitude of correction projects strong support around 10000
• The 38.2 percent retracement of the entire previous major rally of the CY17 from 7,894 to 11,171 is at 9,920

• Placement of Gujarat election result panic low of 10,075

• The long-term 52 EMA is also placed around 9,975

On the higher side, the Nifty has a major resistance near 10,450 as it is the 61.8 percent retracement of the recent fall (10,632–10,142) at 10,444, which also coincides with the high of the previous week at 10,478.

Here is a list of top two stocks which could give up to 20% return

1) Titan: BUY| CMP Rs872| Target Rs1048| Stop Loss Rs768| Return 20%| Time Frame 6 months

The share price of Titan Company has remained in a secular uptrend since December 2016 as it continues to form a higher peak and higher trough in the long-term chart.

Within this structural uptrend, the stock has undergone periodic phases of consolidation providing fresh entry opportunities for investors to ride the uptrend.

We believe the sideways consolidation over the last 11 weeks has approached maturity while the stock provides a good entry opportunity with a favourable reward/risk set-up for medium-term investors to ride the next up move within the larger uptrend.

The key support base for the stock is placed around 770 regions as it is the trend line support joining previous lows December 2016 (307) and September 2017 (564), which also coincides with the recent trough of December 2017 thus making it a major support for the stock.

Considering the overall positive price structure and above-mentioned technical observations, we expect the stock to continue its current uptrend and head towards 1048 in the medium term as it is the price parity of the previous major rally from 564 to 839 (839-564=275 points) added to the December 2017 low of 773 projects upside towards 1048 (773+275=1048) in the medium term.

Merck Ltd: BUY| CMP Rs1510| Target Rs1750| Stop Loss Rs1390| Return 16%| Time Frame 6 months

The share price of Merck is in strong uptrend forming a higher peak and higher trough in the long-term chart since February 2016 as it rallied from 617 to January 2018 all-time high of 1686.

Within this structural uptrend, the stock has undergone periodic phases of corrective decline providing fresh entry opportunities for investors to ride the uptrend.

In the present scenario, we believe the stock has undergone a healthy corrective phase over the last nine weeks and is currently attractively placed near key value area of 1450-1500, thus providing fresh entry opportunity from a medium-term horizon

The stock in the last few sessions has been witnessing base formation around the major support area of 1450-1500 as it is the confluence of the following technical parameters:

a) Rising trend line support joining the lows of 6th December 2017 (1081) and 6th February 2018 (1428) placed at 1500 levels
b) 38.2% retracement of the previous major up move (1081- 1686) placed at 1455 levels
Based on the above technical observation we believe the risk-reward remains favourable and offers a fresh entry opportunity

Time wise the stock has already taken 9 weeks to retrace just 50% of the previous 7 weeks up move (| 1081 to 1686). Shallow price wise correction and elongated time wise consolidation highlights the robust price structure.

Considering the robust price structure and above mentioned technical observations we expect the stock to continue its Current uptrend and head towards 1766 in the medium term being the 123.6% external retracement of the entire previous Decline (1686-1350) placed at 1766 levels

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.