Manish Srivastava
The recent mild correction in Nifty50 was followed by a bullish hidden gap candle on the August 4 where bulls again seemed to have taken control over the prices and index managed to close with a gain of more than 140 points on a weekly basis. In the last three days of July, the index has respected the anticipated resistance level and witnessed mild profit booking. The four days of consecutive fall which started on July 29, finally got arrested after approaching a 20-day simple moving average on the first trading session of August.
Moving ahead, we can expect the prices to take a breather and sideways move with a positive bias can be seen in a forthcoming trading week. Looking at a weekly chart, it's quite apparent that prices have formed a trading range of 10,900 to 11,350. The RSI is trading near an important resistance area and it could shift the prices in the sideways zone for time being. Considering the Fibonacci theory, the 61.8 percent lower projection level based on previous week trading range is falling at 10,920 and it could act as an important support level in an upcoming week. On the other hand, 11,399 will act as an important resistance level, which is 38.2 percent projection level of the aforementioned range. The higher top and higher bottom cycle is still intact in the daily time frame indicating that demand at lower levels will not be ruled out.
To put things into perspective, we can expect the prices to trade in a range of 10,900 to 11,399 with a positive bias in the coming days. Though the index is likely to trade in a range, there are enough opportunities in individual stocks that are likely to outperform the market and can deliver decent returns. We have identified 3 stocks that could offer 6 to 17 percent returns in a short term.
MCX: Buy | CMP: Rs 1,671.60 | Target: Rs 1,950 | Stop loss: Rs 1,566 | Return: 17 percent
Multi Commodity Exchange of India (MCX) has given a breakout on a monthly as well as weekly chart from a rounding bottom formation. The pattern suggests that a big move is expected in the counter in the medium term. The short term traders can also participate in an anticipated rally as the stock has retraced from its highs and is now trading near an important support range. Bulls are expected to take the charge once again as the RSI is trading at an important support level and the overall scenario is falling in a reversal after retracement setup. Traders can initiate buying at current market price (CMP) and on any dip till Rs 1,620 for short term gain.
TCS: Buy | CMP: Rs 2,295.35 | Target: Rs 2,436 | Stop loss: Rs 2,225 | Return: 6 percent
Tata Consultancy Services (TCS) is trading with higher top and higher bottom cycle on the daily chart and recently it has breached the important resistance level on the weekly chart. The fresh leg of the rally can be expected in the coming days where bulls are likely to take the rally forward. The weekly RSI has started trading in a bullish zone for the first time after April 2019.
On a daily time frame, the counter has mildly corrected after the recent rally and taken support at 20-day simple moving average. A positive crossover in momentum indicators and rising ADX suggests that bulls are likely to have upper hands in the short term. Traders can initiate buying at CMP and on any dip till 2260 with a short term perspective.
Asian Paints: Buy | CMP: Rs 1,806.25 | Target: Rs 1,915 | Stop loss: Rs 1,730 | Return: 6 percent
The stock has been trading sideways for the past few days and eventually broke out of falling trendline resistance which has originated by joining the recent highs of April 28 and June 24. The bullish Marubozu candle has formed in the latest Friday's trading session suggesting that bulls have entered the trade and a fresh leg of up move can be expected in the coming days. The bullish curve is shaping up in short term moving averages after a recent phase of convergence. Positive crossover can be seen in stochastic and RSI has started trading in a bullish zone.
Volatility breakout can be seen on intraday charts where prices are tagging the upper Bollinger band in an hourly time frame and momentum indicators are trading in a bullish zone. Traders can initiate buying positions in the stock for short term gain.
Note – Closing price as per NSE on August 7, 2020 is taken as CMP.
The author is Senior Technical Analyst (Equity & Currency) at Rudra Shares & Stock Brokers (SEBI Reg.No.INH100002524) (RA).
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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