Nilesh Ramesh Jain
Nifty took a breather after rallying for six consecutive weeks and formed a small bearish candle on the weekly scale. However, during the week, the Nifty index touched its 78.6 percent retracement of the entire fall which was placed at 11,350 levels.
The Nifty index has major support of 200-DMA which is placed at 10,870 levels. As long as Nifty trades above 10,870 levels, we can expect some consolidation and also a pullback towards 11,200 levels can't be ruled out.
We expect a tepid start on Monday with some rangebound trade. The momentum might slow down as the momentum indicator RSI which stood at 62 has reversed from the overbought territory of 72 and is giving a sense of caution to the bulls.
The volatility index India VIX is hovering below 25 levels from the past couple of weeks which hints at no major movement in the short-term.
The weekly options data indicates that the maximum open interest on the Put side is placed at 11,000 strike, which holds the open interest of 20.6 lakh contracts and also likely to act as a major support in the coming week.
A huge amount of Call writing was seen at 11,200 strike which also holds the maximum open interest followed by 11,400 strike. So, the overall option data indicates some rangebound move in the coming week and Nifty may trade in a narrow range of 11,000 - 11,200.
Bank Nifty underperformed Nifty forming a Bearish Engulfing candlestick pattern on the weekly scale. The Bank Nifty index formed a double top pattern and is also trading in a rising channel, where the upper end of the rising channel is placed at 23,200 levels which will act as a major hurdle and as long as it trades below that, we can expect some consolidation with negative bias. The immediate support is placed at 21,000.
Here are three stocks which can return 11-12 percent in the short-term:
Aarti Industries: Buy | Target: Rs 1,100 | Stop loss: Rs 930 | Return: 11 percent
The stock has provided breakout from a double bottom pattern on the daily chart and also taken support at its long term 200-DMA which is currently placed at Rs 900 levels. The short-term targets for its double bottom pattern are around Rs 1,100 levels. It is also trading above its short term 21-DMA of Rs 930 which will act as immediate support. The momentum indicator and oscillator are on buy mode on the daily chart which hints of further positive momentum in the counter.
Cipla: Buy | Target: Rs 800 | Stop Loss: Rs 680 | Return: 11 percent
The stock provided breakout from a two-month consolidation and is currently hovering near its all-time high levels. It is also trading well above its short-term and long-term moving averages. The MACD has provided a buy crossover and the momentum indicator RSI also provided breakout from its falling channel on the daily chart which hints that the stock will continue its northward journey in the short term.
Grasim Industries: Buy | Target: Rs 710 | Stop Loss: Rs 590 | Return: 12 percent
The stock has formed a double bottom pattern and it is on the verge of a major breakout from the same. The momentum indicator RSI has reversed from its oversold territory and currently placed at 60 levels and also MACD has provided buy crossover on the daily chart. Based on the aforementioned rationale we believe the stock is likely to provide breakout in the coming week and inch towards Rs 710 levels.
The author is Derivative and Technical Analyst at Anand Rathi Shares and Stock Brokers.
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