Hot Stocks: Deploy some capital in market if Nifty trades in 9,500–9,000 range

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Mehul Kothari

Without a doubt, this has been the worst week so far for the domestic markets, as the benchmarks witnessed their steepest fall ever in absolute terms.

The Nifty spot has collapsed more than 12 percent so far during the week to trade near 9,500-mark. On the other hand, the Nifty Bank index has lost around 14 percent to breach the 24,000-mark.

Now at this juncture, the technical supports are not working since the fall is driven primarily by the overall sentiment. We are not witnessing any buying interest whatsoever even at the strongest support level.

Nonetheless, considering the price structure of the Nifty spot, we observe that the index is hovering near the 9,500 mark, which is the 161.8 percent Fibonacci retracement (golden ratio) of the move from 10,640 to 12,430.

Further, at the 9,000-mark, there is the placement of a long-term rising trend line formed by joining the significant swing lows of 2,539 (March 2009) and 5,119 (August 2013).

The zone of 9,500–9,000 could act as strong support for the markets from here. If this support is held in the coming sessions, then we are of the opinion that some stability is likely to return to the markets.

On the other hand, in case of a recovery, the bounce could be very sharp towards 10,300 since the fall, too, was vertical.

Traders are advised to start picking quality Nifty 50 stocks and deploy some of their capital in the given range of 9,500–9,000.

Here are three stocks that could give 8-15% return in the next 1-5 weeks:

Nestle India: Sell| LTP: Rs Rs15,690| Target: Rs 13,600 | Stop-loss: Rs16,600 | Downside: 15%

Nestle India has been an outperformer in the F&O space since May 2019 and has rallied around 70 percent from Rs10,000 mark without any meaningful correction.

Now at this juncture, the stock is showing signs of exhaustion since it has confirmed a lower-top and lower-bottom formation on the daily chart.

The weekly RSI oscillator has confirmed a breakdown from its previous swing low, which indicates the beginning of a corrective move.

Traders are advised to sell the stock near Rs15,600 for the target of Rs13,600 with a stop-loss of Rs16,600. (1–2 weeks).

Tata Steel: Buy| LTP: Rs 291| Target: Rs330 | Stop-loss: Rs255 | Upside: 13%

During the ongoing crash, the Nifty Metal index has been one of the worst performers and has corrected almost 37 percent from a peak of 2,900.

At this juncture, the index is trading near the lower end of a falling channel, which it has been respecting since Jan 2018.

Similar to the Nifty Metal index, being a high weightage stock, even Tata Steel has a similar price structure and is trading very close to the lower end of the falling channel.

In addition, we are witnessing a positive divergence in the weekly and monthly chart of Tata Steel, which indicates the possibility of a bounce.

Traders are advised to buy the stock on dips near Rs280 for the target of Rs330, and a stop-loss can be placed at Rs255. (3–5 weeks).

Dr Reddy’s Laboratories: Buy | LTP: Rs 2882 | Target: Rs3100 | Stop-loss: Rs2650 | Upside: 8%

In the recent fall, stocks like Dr. Reddy’s and Divi’s Laboratories were the last to fall, being defensive by nature.

The stock Dr Reddy has already corrected from Rs3,350 to Rs2,800 and is currently trading above its 200-Days SMA.

Previously, the zone of Rs2,800–2,700 has proved to be a demand zone for the stock. Even at this juncture, the price structure indicates the possibility of a bounce from here.

Traders are advised to buy the stock on dips near Rs2,800 for the target of Rs3,100, and a stop-loss can be placed at Rs2,650. (1–2 weeks).

(The author is Sr. Technical Analyst, IndiaNivesh Securities Limited)

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.