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Last Updated : Nov 11, 2018 12:25 PM IST | Source: Moneycontrol.com

ICICI Direct sees Nifty heading to 10,760; bets on these 2 largecaps

Dharmesh Shah of ICICIdirect.com does not expect the Nifty to breach its immediate support of 10,200

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Dharmesh Shah
ICICIdirect.com

On the weekly scale, the Nifty has formed a strong bull candle, with a higher high and higher low signalling a potential trend reversal after an eight week decline.

The index, on expected lines, maintained its rhythm of not correcting for more than eight weeks as it witnessed a sharp rebound of more than five percent last week after eight weeks of decline.

In the last two trading sessions, the index was seen oscillating in a narrow range and consolidating its recent gains amid lower volumes. The current breather is likely to extend for a day or two, which would cool off overbought conditions developed in the daily stochastic after previous week’s sharp upmove.

We do not expect the index to breach the immediate support area of 10,200. Hence, any corrective decline towards the support area should be used as an incremental buying opportunity in quality stocks.

We expect the index to extend the current upmove towards our earmarked target of 10,760 as it is the confluence of:

  • 6 percent retracement of the last decline from 11,035 to 10,005 at 10,815,

  • Bearish gap (10,858–10,755) on October 4

  • 200 days simple moving average (SMA) placed at 10,765


Structurally, the strong upmove in last week’s trade triggered a bullish structural turnaround as rallies are getting bigger (in magnitude) along with contracting declines. The current 602 points upmove is larger in magnitude compared to the mid-October pullback of 571 points. Also, the last decline (705 points) is less than its early October decline (896 points).

Meanwhile, the weekly stochastic oscillator has logged a bullish crossover while hovering around the oversold zone. Aforementioned technical evidence makes us confident of revising the support base upward at 10,200 as it is:

  • 8 percent retracement of the recent upmove (10,005–10,607) at 10,235

  • Upward sloping trend line (adjoining 10,020-10,105) at 10,240

The Nifty Midcap index took a breather after recording a faster retracement last week as it retraced its earlier seven sessions decline in just four sessions.

Going forward, we expect the Nifty Midcap and Smallcap indices to relatively outperform the broader market. Hence, any dip from here on should be capitalised to accumulate quality stocks with improved earnings.

Here are the top stock trading ideas which can offer positive returns:

Sun Pharma: Buy | CMP: Rs 580 | Target: Rs 659 |  Stop loss: Rs 538 | Upside: 14% | Time frame: 6 months

The pharma sector has relatively outperformed the broader markets during recent corrective phase. Among pharma sector, the index heavyweight Sun Pharma has shown resilience as it undergone secondary phase of consolidation to cool off the overbought situation formed during September 2018.

Currently, prices found support from 200 days SMA (placed around Rs 558) and bounced back. Going ahead we expect stock to form a higher base that would set the stage to unfold next leg of up move, thereby providing fresh entry opportunity.

The share price has resolved out of more than three years long secondary phase of consolidation during August 2018, indicating resumption of primary up trend. After recording 52-week high of Rs 679 prices seen throwback towards Rs 550.

Going ahead, we believe stock would enter in a base formation in the range of Rs 580 - 540 that would pave the way for the next leg of the up move.

Among momentum oscillators, the weekly stochastic oscillator has been inching upward after recording bullish crossover while hovering around oversold territory, indicating acceleration of positive momentum.

The aforementioned technical evidences make us believe that the stock would form a higher base formation around Rs 550 levels and gradually extend ongoing upward momentum towards Rs 659 as it is around 80 percent retracement of last leg of corrective move (Rs 679 -550).

ABB: Buy | CMP: Rs 1305 |  Target: Rs 1550 |  Stop loss: Rs  1190 | Upside:  18% | Time frame: 6 months

The share price of ABB has been oscillating in an upward sloping channel over past two years (drawn adjoining lows of January - December 2016 of Rs 955 -1018, respectively). Recently prices retraced 80 percent of last leg of up move (Rs 1129 – 1517), placed at Rs 1206 levels coinciding with lower band of rising channel. As a result, stock formed a higher low, signifying conclusion of ongoing corrective phase.

Going ahead we expect the stock would hold the key value area of Rs 1200 and resolve higher, as it is:

Long term 200 weeks EMA is placed at Rs 1232

Lower band of upward sloping channel is placed around Rs 1160

Among momentum oscillators, the weekly stochastic oscillator has been inching upward after recently recording bullish crossover, indicating acceleration of positive momentum in the short term.

In a nutshell, we believe the stock has formed a strong base around Rs 1200 zone that augurs well for stock to resolve higher and head towards Rs 1550 in the medium term as it is the price parity of the August-September 2018 up move (Rs 1150 to Rs 1517) added to the October 2018 low of Rs 1190 project up side towards Rs 1550 levels.

The author is Head Technical at ICICIdirect.com Research.

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.​
First Published on Nov 11, 2018 12:25 pm
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