Moneycontrol
Jan 11, 2018 09:36 AM IST | Source: Moneycontrol.com

Nifty heads towards 10,800; 3 stocks which can give up to 21% return in 6 months

Dharmesh Shah believes that any correction from hereon should be used as an incremental buying opportunity as Q3FY18 earnings expectations and Budget expectations would influence investor sentiment.

 
 
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Dharmesh Shah

ICICI Direct.com Research

The equity benchmark index rolled over bullish momentum in the calendar year 2018, further boosted by government’s step of seeking Parliament approval for the recapitalisation of bonds.

Eventually, this helped Nifty to record all-time high of 10,659. Similarly, Midcap & Smallcap indices are sustaining at all-time high suggesting buoyancy in the broader market.

On a weekly basis, the index has continued showing respect to the long-term trend line joining the December 2016 and September 2017. The resilience of the key long-term trend line indicating that the market internals remains robust and bodes well for the continuance of the primary uptrend.

Thus, we believe that any correction from hereon should be used as an incremental buying opportunity as Q3FY18 earnings expectations and Budget expectations would influence investor sentiment.

We expect Nifty to move towards 10,836 as the recent leg of up move from December low of 10,033 would equate with October rally (9,687-10,490) at 10,836.

In the entire up move since December 2017, intermediate corrective phases have not lasted more than 2-3 trading sessions post which the index has resumed the uptrend.

Based on this tendency, we expect current consolidation to conclude over the coming one week post which the index should resume upward momentum.

The ongoing secondary corrective phase forms part of the larger degree uptrend and provides incremental opportunity to accumulate quality stocks in a staggered manner.

The immediate support base for the index has shifted upwards to 10,400 regions as it is the confluence of following:

a) Recent swing low of 10,405 recorded on 2nd January 2017.

b) 38.2 percent retracement of the current leg of the rally starting from low of 10,033 to high of 10,659.

Here is a list of top 3 stocks which could give up to 21% return in the next 6 months:

Reliance Industries Ltd: BUY| CMP Rs942 | Target Rs1070| Stop Loss Rs864| Return 14%| Time Frame 6 months

The share price of RIL was consolidating after recording a 52-week high of | 960 in November 2017. Since then, it has been trading in a contracting range.

The stock has resolved out of a contracting symmetrical triangle pattern, where it has also broken out of five weeks high of Rs939, leading to higher high on the daily chart signalling end of the corrective phase and resumption of the fresh uptrend.

The overall positive structure remains intact as the stock has already taken nine weeks to correct just 50% of the previous five weeks’ rally from Rs786 to Rs957.

The limited price wise correction corresponding to elongated time correction shows inherit strength and foretell positive momentum, going ahead.

On the downside, the share price has a key support around Rs868 in the medium term as it is the 50% retracement of the last leg of the rally (Rs779-958).

The above-mentioned technical evidence suggests the two months’ consolidation is likely to conclude, in turn, giving a fresh entry opportunity.

We expect the stock to move higher towards the projected target of Rs1070 in the medium term being the price equality of the last up leg from Rs779– 958.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

Maharashtra Seamless: BUY| CMP Rs526| Target Rs578| Stop Loss Rs491.00| Return 10%| Time Frame 1 months

The share price of Maharashtra Seamless has recently broken out of a consolidation pattern and has been consolidating above the same in the last one week signaling positive bias.

The breakout from the consolidation range was accompanied by a sharp surge in volume that is more than five times the average volume seen over the past 200 sessions.

After a strong rally in October 2017, the stock entered a consolidation phase over the next two months during which it formed a higher low after having retraced just 50% of the preceding rally.

The stock has now given a resolute breakout from this consolidation, suggesting at the resumption of the uptrend. We feel that the stock is likely to head higher in the near-term towards Rs580, being the price parity of the previous up move from Rs384 to Rs513 as projected from recent trough of Rs 450

Zee Entertainment: BUY| CMP Rs580| Target Rs698| Stop Loss Rs522.00| Return 21%| Time Frame 6 months

The share price of Zee Entertainment managed to topple its CY2000 peak in late 2016. Since then, it has been in a consolidation mode thereby discounting the disruptions created by key reforms like demonetisation and implementation of GST.

The recent price action has led the share price to resolve out of consolidation signalling resumption of a fresh up trend. The share price corrected from its October 2016 peak of | 589 to anchor around Rs430 in December 2016.

The subsequent 12-month period witnessed a basing pattern wherein the stock discounted a host of headwinds while maintaining a higher bottom formation.

The entire price action during this period has taken the shape of a contracting symmetrical triangle, which is a continuation pattern. The consolidation, which is viewed as a secondary corrective phase within the primary up trend, has rested upon long-term 52-week EMA.

In early December 2017, the share price resolved higher out of a triangle pattern signaling end of corrective bias and resumption of the uptrend.

The aforementioned technical observations make us believe the consolidation phase that lasted over 12 months has come to maturity, in turn, giving a fresh entry opportunity.

We expect the stock to move higher towards the projected target of Rs720 in the medium term. The area of Rs182 in the medium term is the pattern implication of a Triangle consolidation (158-133) as projected above the breakout level of Rs157.

Disclaimer: The author is Head Technical, AVP at ICICI Direct.com Research. 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.
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