Bulls have extended the rally and a new all-time high was witnessed in benchmark indices in the past trading week. The gain of approximately 250 points on a week-on-week basis has placed the Nifty above the 13,750-mark.
Though the strength is still intact, but the bell of caution can be heard as momentum indicators are trading in a highly overbought zone and prices are trading far above short-term moving averages. The overbought indicators do not indicate the weakness but the pause in an ongoing trend. The indicators might remain in the overbought zone for the extended period and the price could still go higher and this rally can extend up to the 13,950 level (61.8 percent projected retracement level of previous month's trading range).
The caution at a higher level is required as mild correction in order to maintain demand/supply adjustment might not be ruled out from the afore mentioned levels. The short-term support is emerging at 13,570 and 13,411 and any fall till these levels would offer buying opportunities to traders. Considering the derivatives data and moderate India VIX (volatility index) levels, the major fall is not expected in the short term and stock-specific opportunities would keep the traders in high spirits.
We have identified three trading ideas that could provide up to 15 percent return in the short term.
Bajaj Auto: Buy | CMP: Rs 3,347.55 | Target: Rs 3,600 | Stop Loss: Rs 3,220 | Return: 8 percent
After a recent upmove, the stock has retraced mildly from the higher levels keeping its higher top and higher bottom cycle intact. The ongoing consolidation has taken the shape of a bullish flag pattern and the bullish candle formed on Friday's trading session suggests that a probable breakout could take place. The fresh leg of buying might not be ruled out in coming trading sessions.
The mild correction has been arrested at the short-term moving averages ribbon and RSI is bouncing back from a significant support level. The rising average directional index (ADX) indicating the strength of an ongoing bullish trend. Traders can initiate buying at the current market price (CMP) and on any dip till Rs 3,310 with the short term perspective.
Bajaj Consumer Care: Buy | CMP: Rs 215.10 | Target: Rs 245 | Stop Loss: Rs 200 | Return: 14 percent
The prolonged downtrend of the stock seems to be coming to an end. The prices have started trading above a 50-week exponential moving average and the bullish crossover of short-term and medium term moving averages ribbon in the weekly time frame suggesting that trend reversal buying is expected in the counter in the near term. The RSI has started trading in a bullish zone for the first time since February 2018.
In the daily time frame, the stock is trading above all major short term and medium term moving averages and the falling trend line resistance has been breached on an upside. Traders can initiate buying positions at CMP and on any dip till Rs 208.
Birlasoft: Buy | CMP: Rs 207.15 | Target: Rs 238 | Stop Loss: Rs 196 | Return: 15 percent
The stock looks poised for a fresh breakout. After a recent rally, the counter went sideways for almost 2 months and formed a rounding pattern where the consolidation of prices near its 20-day moving average has laid the foundation for a fresh up move. The short-term moving averages have developed a positive curve and momentum indicators have started trading in the bullish zone. Traders can initiate buying at CMP and add more once the stock starts trading above the Rs 211 level.Disclaimer: 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.