The Nifty is likely to face resistance near 10,820 levels and then near the 10,885–10,930 zone, says Aditya Agarwal of Way2Wealth Brokers
Despite the breakdown seen on the charts from 10,700 levels during last week, bulls showed tremendous resilience and rebounded sharply from its support level of 10,550.
Looking at the daily chart, the index is broadly trading in a range. It has formed a triangle pattern and is currently trading near the mid-point of that pattern.
Looking at the recent momentum, Nifty formed lower peaks on the daily chart. Also, the daily relative strength index (14) is correcting and forming lower peaks. Such a pattern indicates a probable distribution phase. The weekly RSI (14) continued its struggle near 60 levels.
Now, the Nifty is likely to face resistance near 10,820 levels and then near the 10,885–10,930 zone. On the flip side, 10,550 which coincides with the June month and daily swing low, will act as strong support. Immediate support is seen near 10,675 levels.
Options data suggest more of rangebound trade for the Nifty in the short term. On the higher side, call writing at 10,800 strike option will continue to act as a stiff resistance zone, whereas put writing at 10,600 will act as a strong support for the index.
Any breakout from this range will set the direction for indices in the short to medium term.
Here is a list of top three stocks that could offer 5-10 percent return:
Marico: Buy around Rs 345 – 340 | Target: Rs 360| Stop loss: Rs 335 | Return: 4.6%
Looking at the daily chart, the stock has consolidated in a range and formed a Descending Triangle pattern. During Wednesday’s trade, the stock confirmed its breakout from the triangle pattern.
The daily Bollinger Band which has now started expanding indicates a period of high volatility on the card. Thus, we recommend traders to accumulate this stock in the range of Rs 345 to Rs 340 with a price target of Rs 360 and a stop loss placed below Rs 335.
Motherson Sumi Systems: Sell around Rs 294– 297 | Target: Rs 264 | Stop loss: Rs 310 | Return: 10%
After confirming its breakdown from the Head & Shoulder pattern on the weekly chart, the stock has corrected sharply and hit a fresh 52-weeks low of around Rs 274.
Subsequently, it saw a decent pullback from the oversold zone and gradually rallied towards Rs 295 – 297 zone. Looking at the daily chart, the zone of Rs 295 – 300 which was earlier acting as an immediate support had reversed its role post-breakdown and now will act as an immediate hurdle.
The daily RSI (14) has signaled a Negative Reversal pattern on daily chart. Thus, we advocate traders to build a short position in the range of Rs 294 to Rs 297 with a price target of Rs 264 and a stop loss placed above Rs 310 on a closing basis.
Cholamandalam Investment: Sell below Rs 1,483 | Target: Rs 1,365 | Stop loss: Rs 1,530 | Return: 8%
After forming a Lower Top on the daily chart, Chola Finance corrected sharply and broke the swing low of Rs 1,465 which eventually confirmed the Lower Top Lower Bottom formation on the daily chart.
Subsequently, the stock consolidated in a narrow range which resulted into a formation of Bearish Flag pattern on the daily chart.
The said pattern will be confirmed if the stock starts to trade below Rs 1,483. The daily RSI (14) broke the support level of 40 which support our hypothesis. Thus, traders can short Cholamandalam Investment below Rs 1,483 with a price target of Rs 1,365. A stop loss should be placed at Rs 1,530.Disclaimer: The author Head of Technical Research, Way2Wealth Brokers Pvt. 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.