Shabbir Kayyumi Narnolia Financial Advisors
Last week saw a massive sell-off in Nifty due to news flow around rupee and crude but the week ended almost sideways with Nifty showing a mere 74 points decline on a weekly basis. Nifty recovered from a strong support of 50-DMA and closed above 5-DMA.
At the same time, Bullish AB=CD Harmonic pattern formed on an hourly chart of Nifty signifies that this sustained pullback above 11,385 levels can extend for the second target of the harmonic pattern which is seen near 11,560 as it is near 61.8 percent of A to D leg.
Now, the question is whether the recent correction is a temporary blip or would be a prolonged one. This week movement would be critical to decide the same.
Interestingly, RSI tilted up from the bottom level of 40 (RSI CHANNEL) while retracement was in an action, which indicates uptrend is intact. But the appearance of a falling wedge classical pattern on lower time frame will only give a breakout once Nifty closes above 11,535. However, lower time frame trend line suggests breakout will be above 11,585 levels only.
Looking at open interest front, highest open interest (OI) in Put was seen around 11,400 strike followed by 11,500 strike with the difference of only 2 lakh whereas maximum OI in Call is around 11,800 levels, followed by 11,600. Option data indicates an immediate trading range between 11,300 and 11,600 levels.
11,600 is the key Nifty level and one should change stance to bullish once the same is broken on the upside. We suggest taking stock-specific long position with strict stop loss levels.
Here is a list of 5 stocks which could return 8-26% in short term:
Uflex: Buy | CMP: Rs 340.50 | Target: Rs 430 | Stop Loss: Rs 305 | Upside: 26%
Stock bottomed out near the levels of Rs 245-250 and has been forming an inverted Head and Shoulder pattern as a mother pattern on daily chart. The emergence of bullish candles near neckline is showing upswing move from where the stock can give a breakout on the upside.
The scrip has respected the uptrend line and a price has started running in the channel. Sustainability above 23.6 percent Fibonacci retracement of the fall from Rs 506 to Rs 245 levels also creating positive rhythm in the scrip.
Increasing peaks of MACD histogram and sustainability of RSI in the bullish zone adds the conviction of buying the scrip around Rs 340.50 for the target of Rs 430 with the stop loss of Rs 305.
Bank of India: Buy | CMP: Rs 93.20 | Target: Rs 109 | Stop Loss: Rs 85 | Upside: 17%
Earlier stock gave falling channel breakout but recently it has retraced towards its falling channel resistance line which is now acting as a fresh support from where bounce back can be seen in the coming days.
Formation of morning star on the daily chart is also implying strength. RSI also tilt on the upside after being bottom out near the level of 30 marks. As long as it sustains above falling channel resistance line, the bias will remain positive and it can resume its trend on the upside.
Buy Bank of India at Rs 93.20 with stop loss of Rs 85 for the target of Rs 109 levels.
Yes Bank: Buy | Buy around: Rs 320 | Target: Rs 370 | Stop Loss: Rs 298 | Upside: 15%
Scrip seems bottoming out at its lower levels of Rs 310 mark from where it formed morning star on daily chart suggesting upsurge on the higher side.
Scrip took support from its upward sloping line along with declining histogram in the negative territory of MACD and oversold RSI on the daily chart are giving cues that scrip can take a turn on northward side.
Principal of polarity can provide strong support in coming sessions. Aforementioned rationale suggests buying in the scrip around Rs 320 for the target of Rs 370 with the stop loss of Rs 305-mark.
Apollo Hospitals: Buy | Buy around: Rs 1,100 | Target: Rs 1,220 | Stop Loss: Rs 1,049 | Upside: 10%
The stock has witnessed a decent correction recently from the peak of Rs 1,234 and after that, it retesting its double bottom neckline which is creating a buying opportunity in the scrip.
RSI has found near oversold zone and has indicated a reversal to maintain a positive bias and has potential to rise further in the coming days.
Stochastic is also looking firm lending support to price action. Trendline breakout is expected above Rs 1,125 from where the momentum of buying will increase.
With the chart looking attractive and decent volume participation witnessed, we recommend a buy on dip at Rs 1,100 in this stock for an upside target of Rs 1,220, keep a stop loss of Rs 1,049.
HDFC Bank: Buy | CMP: Rs 2,027 | Target: Rs 2,185 | Stop Loss: Rs 1,948 | Upside: 8%
Scrip seems bottoming out at its lower levels of Rs 1,989-mark from where it formed morning star on daily chart suggesting upswing on the upside.
Scrip took support from its upward sloping line along with declining histogram in the negative territory of MACD and oversold RSI on the daily chart are giving cues that scrip can take a turn on positive side.
The principal of polarity can provide strong support in coming sessions. Aforementioned rationale suggests buying in the scrip around Rs 2,030 for the target of Rs 2,185 with the stop loss of Rs 1,948-mark.
Disclaimer: The author is Head - Technical & Derivative Research at Narnolia Financial Advisors Ltd. 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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