Nifty gave a stellar rally in the last week and managed to sustain above crucial psychological 11,500 mark. Strong bullish candlestick pattern 'Opening Marubozu' on weekly chart clearly indicates prices are controlled by dominating bull. Unless this pattern negates the scope of prices trading higher towards 12,000 is cannot be ruled out.
At the same time India VIX is trading at 18.35, below its 10 DMA placed at 19.90 and 20 DMA standing at 21 levels suggests lower volatility, which is also supportive for prices. Recently Nifty traded decisively above 89 SMA (High) and 89 SMA (Low) on the weekly timeframe which implies potential of the market to trade higher in mid-term as well as long term is possible.
Nevertheless, The index has given a Flag pattern breakout after a weekly closing above 11,300 mark and targets as per the formations are the height of the pole which is almost 1,000 points which come to 12,150 on the higher side. After breaching 11,500 levels, Nifty is trading in a new zone and any daily close above intermediate resistance of 11,700 can push index towards 12000 mark.
Moreover, majority of the oscillators are in overbought zone and sideways movement to cool off cannot be ruled out. However, it can be a healthy sign and one should opt for buy on dip strategy as long as Nifty is trading above 11,280 mark where crucial support of the ascending trend line is lies.
Bank Nifty gave a breakout by trading above the highest peak in the last week and managed to close in positive territory. Banking index has formed a bullish Marubozu candlestick pattern which implies a positive tone to continue in the mid-term timeframe and possibility of touching its 200 DMA placed around 25,000 cannot be ruled out.
Here is the list of three stocks which could return 10-26 percent in short term:
Equitas Holdings: Buy Around Rs 57 | Target: Rs 72 | Stop Loss: Rs 50 | Upside: 26 percent
This counter appears to be consolidating in a larger band of Rs 57–54 for the last few weeks. Hence, dips are getting bought into, hinting at some sort of accumulation at lower levels. We believe once this counter manages a sustainable close above Rs 57, it can witness a swift move towards its logical targets placed around Rs 72. Therefore, advises positional traders to buy into this counter around Rs 56-57 levels. The stop loss suggested for the trade is a close below Rs 50.
Indiabulls Housing Finance: Buy Around Rs 216 | Target: Rs 250 | Stop Loss: Rs 200 | Upside: 15 percent
The stock price has broken out from Inverted Head & Shoulders on the daily charts. It has closed above the consolidation range of the last few weeks with the higher volumes, and is placed above all important moving average parameters. Oscillator setup is bullish on the short-term charts and recommends buying the stock around Rs 216-220 with a target price of Rs 250 and a stop loss of Rs 200 on closing basis.
Housing Development Finance Corporation: Buy Around Rs 1,865 | Target: Rs 2,050 | Stop Loss: Rs 1,760 | Upside: 10 percent
On the daily chart, the stock has taken the support of the rising trend line and 50 & 20 days SMA. The stock also gave a breakout from its consolidation zone on the daily chart along with flag pattern breakout on the hourly chart indicating a pullback on the upside. The momentum indicators and oscillators are very well in the buy mode on a weekly scale which hints that bulls are still having an upper hand. Based on the above technical structure, one can take long position in the stock around Rs 1,865 with stop loss of Rs 1,760 for the target of Rs 2,050.
The author is Head of Technical Research at Narnolia Financial Advisors Ltd.
Disclosure: Narnolia Financial Advisors/Analyst (s) does/do not have any holding in the stocks discussed but these stocks may have been recommended to clients in the past. Clients of Narnolia Financial Advisors Ltd. may be holding aforesaid stocks. The stocks recommended are based on our analysis which is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed.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.