Volatility needs to move below 16 for market up move to sustain. However above moving 18, could lead to profit booking in market.
After a late rally, Nifty logged in gains for the fourth consecutive day on October 16. The index closed higher by 0.31 percent at 11,464 levels. The broader indices underperformed benchmark with BSE Midcap losing 1.38 percent and Smallcap gaining 0.21 percent respectively for the day.
Market breadth on NSE was negative with an advance-decline ratio of 8:10 ratio.
Nifty formed a Doji candle which is a sign of indecision. Also, on hourly chart, index has formed Bearish Rising Wedge pattern. However, the Nifty has been forming higher highs and higher lows for the last few days.
Thus, sustaining above 11,400 levels, the market can rally towards 11,650-11,700 zone. Breaking below 11,400 levels index can correct towards 11,250 odd levels. However, on the downside 11,100-11,060 is the critical support zone for the market now.
In Nifty October monthly expiry options, maximum open interest for Put is seen at strike price 11,000 followed by 11,400; while for Call maximum open interest is seen at 12,000 followed by 11,500. Nifty Put-Call option distribution data is suggesting support at 11,200 levels and resistance at 11,700 levels.
India VIX declined by 2.91 percent to close at 16.36 level for the day. VIX has again seen a reversal from 18 levels which has been acting as overhead resistance. But it needs to move below 16 for market up move to sustain. However, moving above 18 levels could lead to profit booking in the market.
Below are the top 5 stocks which can give 9-16 percent return in 1-3 months:
Divis Laboratories: Buy | CMP: Rs 1.,720 | Stop loss: Rs 1,660 | Target: Rs 1,900 | Upside: 10 percent
The stock is in long-term uptrend forming higher top and higher bottom on weekly chart for last two years. It touched an all-time high of Rs 1,775 in March this year and then corrected down to low of Rs 1,466 in August. It witnessed consolidation between Rs 1,680 and Rs 1,466 levels over a four-month period to form a base for next leg of up move.
It is now showing breakout on the upside from consolidation. Price has given a breakout on the upside from Bollinger Band with expansion of bands indicating a continuation of the trend in the direction of breakout on the daily chart.
MACD had flattened around the equilibrium level of zero and it has turned up on weekly chart indicating a change in the long-term trend. Thus, stock can be bought at current levels and on dips to Rs 1,695 with stop loss below Rs 1,660 for the target of Rs 1,900 levels.
Polycab India: Buy | CMP: Rs 718 | Stop loss: Rs 690 | Target: Rs 800 | Upside: 11 percent
The stock was in a downtrend from high of Rs 677 in May this year to touch a low of Rs 526 in September. Since then, the stock has rallied on strong momentum and high volumes indicating buying participation in the stock.
The recent correction in stock has taken support at the previous swing high of Rs 655. Also, the 21-day exponential moving average which has been acting as support and resistance for the stock. Relative strength index has given positive crossover with its average on the daily chart. MACD line has given a positive crossover with its average on the daily chart.
Thus, the stock can be bought at current levels and on dips to Rs 707 stop loss below Rs 690 for the target of Rs 800 levels.
Reliance Industries: Buy | CMP: Rs 1,372 | Stop loss: Rs 1,330 | Target: Rs 1,500 | Upside: 9 percent
The stock touched an all-time high of Rs 1,417 in the month of May this year and then corrected down to Rs 1,095 levels. It found support at 100-week moving average and since then bounced back to current levels. In late September, the stock witnessed a breakout above the resistance level of Rs 1,300.
The volumes have been above average on up moves indicating buying participation in the stock. MACD has moved above the equilibrium level of zero on the weekly chart, indicating change in long-term trend.
Thus, the stock can be bought at current levels and on dips to Rs 1,355 with stop loss below Rs 1,330 for the target of Rs 1,500 levels.
ICICI Prudential Life Insurance: Buy | CMP: Rs 466 | Stop loss: Rs 440 | Target: Rs 540 | Upside: 16 percent
The stock has been in an uptrend forming higher tops and higher bottom on the daily chart since its February low of Rs 277. Looking broader on the weekly chart, the stock has formed rounding bottoming out and witnessing breakout.
Recent correction from the all-time high of Rs 474 has taken support at 21-day exponential moving average and seen a bounce back. Relative strength index has given positive crossover with its average on the daily chart.
Thus, the stock can be bought at current levels and on dips to Rs 459 with stop loss below Rs 440 for the target of Rs 540 levels.
Bajaj Finance: Buy | CMP: Rs 4,016 | Stop loss: Rs 3,840 | Target: Rs 4,540 | Upside: 13 percent
The stock had witnessed consolidation between Rs 3,450 and Rs 3,000 levels over a three-month period to form the base. It saw breakout in last month on strong momentum and high volumes. Since then it has been trading in a range of Rs 3,800 and Rs 4,100 odd levels for last three months consolidating its gains.
The stock has formed bullish continuation Pole and Flag pattern on the daily chart. Now it is showing signs of a breakout with bullish candle and good volumes. Relative strength index has given positive crossover with its average on the daily chart. The Average Directional Index (ADX) line, indicator of trend strength has moved above equilibrium level of 20 with rising Plus Directional line on weekly chart.
Thus, the stock can be bought at current levels and on dips to Rs 3,950 with stop loss below Rs 3,840 for the target of Rs 4,540 levels.
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
The author is Head of Technical and Derivatives, Sanctum Wealth Management.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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.