Nifty likely to see resistance around 10,640; 3 stocks which could give up to 7% return

For the month ending February 2018, the Nifty formed a bearish “Engulfing” candlestick pattern on the monthly chart. The bearish implication of this pattern validates when low made during the bearish candle is breached in the next candle.

In the current scenario 10,276 is the level, and below which the momentum selling may get triggered. It is very crucial for bulls to hold Nifty above the previous bottom level of 10,276.

There is also a support derived from the Trend line, adjoining the bottoms of 6th December 2017, 18th December 2017, 6th February 2018 and 19th February 2018, which projects around 10,300.

This line has already acted as reversal point for a couple of times in the recent past and that is why we believe that the violation of the same would trigger a fresh sell-off in the markets.

As far as resistance is concerned, 10,640 would remain a big hurdle for the Nifty and unless that is taken out, sell on the rise should be the strategy for the traders. Below 10,300, Nifty could plunge towards its next support placed at 9,920.

BankNifty has recently tested its 200-DMA support, placed at 24,746 and there is also unfilled gap support placed in the range of 24,293-24560, which can act a support. Resistance, for the same, is placed at 25,725.

IT is the sector which can outperform in the current market scenario. TCS was the stock, recommended by us under this column on 20th Feb 2017. The target of Rs 3,100 is decisively met with a total yield of 7 percent in 15 days.

We reiterate our bullish view on IT stocks from here also. We have been bullish on the stocks like TCS, NIIT Technologies, MindTree and Tech Mahindra and we maintain our bullish stance.

We have collated a list of three stocks which can give up to 7% return in the short term:

Tech Mahindra Ltd: BUY| Target Rs. 675 | Stop-loss Rs 600 | Return 7%

The stock has registered a new 52-week high with a significant jump in the volumes, to close at 630.85. The stock price has also broken out from the consolidation which was there in the range of 570-630 for the last 5 weeks.

The primary trend of the stock has been bullish with higher top and higher bottoms on the weekly and the monthly charts. The short-term moving averages are trading above the long-term moving averages which indicate continuation of an uptrend.

For the quarter ended December 2017, the stock broke out from the bullish “Flag” pattern on the long-term quarterly charts. We have seen nice follow-up buying in the current quarter. The Oscillators and momentum indicators such as RSI, MACD, and KST showing strength in the existing uptrend.

IT sector has been showing resilient move for last 3 months and the same is likely to continue in the days to come, especially when Dollar Index seems to have bottomed out against major currencies. We recommend buying Tech Mahindra for the upside target of 675, keeping SL at 600.

Chambal Fertilisers: BUY| Target Rs. 177 | Stop-loss Rs 155 | Return 7%

On 26th Feb 2018, the stock registered a new 52-weeks high and all-time high with a jump in volumes. For the last four sessions, the price has been consolidating in the range of 158-170 with relatively lower volumes.

The stock price currently placed above 20, 50, 100 and 200 DMA, indicating bullishness on all time frames. The stock is one of the few fertilizer stocks, which is hovering around its all-time high.

Oscillators like MACD, KST, and ADX are showing strength on weekly and monthly charts. The level of 155 seems to have become the floor for the short term trend and the recent correction from all-time high seems to be an opportunity for traders to initiate fresh longs.

We recommend buying Chambal Fertilisers for the upside target of 177, keeping a stop loss below Rs155.

Hindalco: SELL| Target Rs. 215 | Stop-loss Rs 238 | Return 6%

The stock price has recently violated the crucial support of multiple bottoms placed around 132 on the daily charts. The price has also breached the support of its 200-DMA, placed at 237.50.

The stock closed at the lowest level since 25th Sep 2017. The price witnessed a violation of support along with the rise in volumes.

The stock has been forming lower tops and lower bottoms on the on the daily chart since starting of this calendar year. The stock has reached below 20, 50, 100 and 200-DMA indicating a bearish trend on short to medium term charts.

Though the entire month of March is yet to be finished for this quarter ending, there are good chances of stock forming a bearish engulfing pattern on its quarterly charts. We recommend Selling Hindalco for the downside target of 215, keeping a stop loss at 238.

Disclaimer: The author is Technical Analyst, PCG Desk, HDFC Securities. 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.