This time the Diwali has come with life high levels on the benchmark indices. Nifty has managed to close above the previous life high of 12,430 by giving decisive up move which is an indication of impulse move and typical behaviour of wave III as per Elliot Wave theory. At the same time, flat bottom green Heikin-Ashi candlestick pattern on daily, weekly and monthly time frames is also supportive of bullish price movement.
The 5-SMA and 10-SMA bullish crossover and sustainability of prices above both the moving averages in the weekly time frame indicate that the mid-term trend is bullish which is also visible in recent movement. However, this move can continue to trade northward unless last week's low standing around 12,350 is taken out.
Considering the recent up move in the form of ABCD harmonic pattern, the index is progressing in CD leg and it has achieved its 1.272 levels of AB in the last week; however, possibility of extension of up move towards 1.618 levels (13,500) cannot be ruled out. At the same time, majority of the momentum oscillators & indicators are in the overbought zone, hence the possibility of correction towards the line of polarity placed around 12,400 cannot be ruled out.
Bank Nifty continued its stellar rally during the last week and managed to give closing above 100-week SMA placed around 27,000 almost after 10 months. Bullish flat bottom Hekin-Ashi pattern also suggests positive bias and banking index can continue to trade higher towards 30,000 levels unless it breaches the previous weeks low placed around 27,000.
Here are three stocks which could return 7-16 percent in the short term:
LIC Housing Finance: Buy Around Rs 310 | Target: Rs 360 | Stop Loss: Rs 280 | Upside: 16 percent
Stock has witnessed inverse Head & Shoulder breakout on daily chart along with Triangular pattern of weekly chart. Inclining peaks of MACD suggest upside move, +DMI has given crossover above -DMI which also indicates strength in the counter. Daily RSI is also trading in the bullish horizon. One can long around Rs 310-306 zone with stop loss of Rs 280 for upside target of Rs 360 & Rs 375.
Bharat Electronics: Buy Around Rs 95 | Target: Rs 110 | Stop Loss: Rs 86 | Upside: 15 percent
On the daily chart, stock has broken out of double bottom pattern and sustainability above the same triggering an extension of the uptrend. On the weekly chart, it continues to form positive reversal candle, affirming the strong bullishness dominant in the stocks. Prices has also broken out of the upper end of the Bollinger Bands and RSI is trading above the 60 level, portending to an extended uptrend. The stock can be bought in the range of Rs 92-95 for targets of Rs 105 & Rs 110. One can keep a stop loss below Rs 86.
Godrej Industries: Buy Around Rs 380 | Target: Rs 410 | Stop Loss: Rs 364 | Upside: 7 percent
The stock is expected to give inverted head & shoulder breakout on daily chart with decent volume. Bullish crossover in Stochastic and MACD are looking supportive for this upside breakout. Positive crossover of 20 & 50 DMA's indicating strength. Key support lies at Rs 364-370 zone until this break decisively, long position can be held. Investors can take entry around Rs 380-384 with stop loss of Rs 364 on closing basis for the target of Rs 410.
(Shabbir Kayyumi, Head of Technical Research at Narnolia Financial Advisors Ltd.)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.