Ashish Chaturmohta
Bulls saw some respite on September 4 as the Nifty gained 0.43 percent to close at 10,845. Broader market indices, the BSE Midcap and Smallcap, too, were up by 0.14 percent and 0.29 percent, respectively.
Market breadth on the NSE was positive with more than one stock advancing for every decline. The Nifty has taken support from 10,746 , which is 78.6% Fibonacci retracement of the recent rally from 10,636 to 11,142 levels.
If the index holds above 10,746, the Nifty can see a bounce back towards Pres11,040 levels. But, 11,150-11,200 is a critical zone for the market where multiple resistances are seen.
On the downside, if the index slips below 10,746, the next support is placed at 10,636. A break below 10,636 will signal a continuation of the decline and may take the index to 10,450.
The maximum open interest for put is seen at strike price 10,800, followed by 10,600; while for call maximum open interest is seen at 11,200, followed by 11,700.
Thus, option distribution is suggesting support at 10,800-10,750 and resistance at 11,000-11,050 levels.
The India VIX jumped by 4.57 percent to close at 17.23 levels for the day. VIX is hovering in the region of 18.5-16, which is attracting selling pressure at higher levels, and it needs to move below 16 for a sustainable bounce back in the Nifty. However, VIX moving above 18 will accentuate selling pressure in the market.
Here is a list of Top 5 stocks which could give 10-16% return in the next one-three months:
ICICI Prudential Life Insurance: Buy| LTP: Rs 427| Stop Loss: Rs 405| Target: Rs 495| Upside 16 percent
The stock hit an all-time high of Rs 509 in July 2018 and then declined to touch a low of Rs 277 in February 2019 . The rally from the low of Rs 277 faced resistance at around Rs 405 odd levels, where the falling resistance trend line connecting highs of 509 and 462 is seen.
For three months, the stock was consolidating below Rs 405 and in the last week, it witnessed a breakout. The breakout was on the back of strong momentum and good volumes, which indicates buying participation.
Currently, it is trading at 52-week highs and formed the bullish pole and flag continuation pattern on the daily chart.
MACD has given positive crossover with its average above equilibrium level of zero on a weekly chart. Thus, the stock can be bought at current levels and on dips towards Rs 420, with stop loss below Rs 405, and a target of Rs 495 levels.
Dr. Lal Pathlabs: Buy| LTP: Rs 1,256| Stop Loss: Rs 1,190| Target: Rs 1,400| Upside 11.4 percent
The stock has been in steady uptrend, forming higher tops and higher bottoms on the weekly chart. It has been consolidating above its 89-day exponential moving average (DEMA) between Rs 1,180 and Rs 1,030 for the last few months and formed a base.
Last week, the stock witnessed a breakout from the range with strong momentum and high volumes, which indicates buying participation.
The stock touched a 33-month high and looking at the longer time frame chart, it is forming bottoming out pattern on a monthly chart.
The price has given a breakout on the upside from Bollinger Band, with the expansion of bands indicating a continuation of the trend in the direction of breakout on the daily as well as on the weekly chart.
The Average Directional Index (ADX) line, an indicator of trend strength, has moved above the equilibrium level of 20 with rising plus directional line on the daily chart.
Thus, the stock can be bought at current levels and on dips towards Rs 1,235, with a stop loss below Rs 1,190 and a target of Rs 1,400 levels.
After registering a low of Rs 1,228 in May, the stock has been moving higher along the rising support trend line connecting closing price of Rs 1,234 and Rs 1,397.
It has formed a base after consolidating between Rs 1,530-1,230. Last week, the stock witnessed a breakout above Rs 1,530 and retraced on below-average volumes, suggesting market participants are holding onto the stock.
Also looking at a higher time-frame weekly chart, the stock is in the process of forming a double bottom pattern with lows at Rs 1,230.
MACD has moved above the equilibrium level of zero and is moving higher on the weekly chart. Thus, the stock can be bought at current levels and on dips towards Rs 1,500, with a stop loss below Rs 1,460 and a target of Rs 1,700 levels.
The stock has been in an uptrend, forming higher tops and higher bottoms for 11 months on the weekly chart. The stock was facing resistance around Rs 285, where 61.8% Fibonacci retracement of the entire decline was seen from Rs 357 to Rs 163.
After consolidating for five months between Rs 240 and Rs 285, the stock is sustaining above the breakout levels.
The price has given a breakout on the upside from the Bollinger Band, with the expansion of bands indicating a continuation of the trend in the direction of breakout on the weekly chart.
MACD has given positive crossover with its average above equilibrium level on the weekly chart. Thus, the stock can be bought at current levels and on dips towards Rs 296, with a stop loss below Rs 285, and a target of Rs 340 levels.
Ambuja Cements Ltd: Sell| LTP: Rs 191| Stop Loss: Rs 198| Target: Rs 170| Downside 11 percent
The stock is in a downtrend, forming a lower top and lower bottom on the daily chart after hitting a high of Rs 240 in May.
The stock has moved below its previous swing low of Rs 194, indicating a continuation of the downtrend. Volumes have been above average, indicating selling pressure.
The price has also given a breakdown from the Bollinger Band. The momentum indicators are in a bearish mode on the daily as well as the weekly chart.
Thus, the stock can be sold at current levels and on the rise towards Rs 194, with a stop loss above Rs 198, and a target of Rs 170 levels.
Note: Time Frame for all the above recommendation is one-three months.
(The author is Head of Technical and Derivatives, Sanctum Wealth Management)
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.
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