Nifty may head to sub-10,000 levels in December; 5 stocks with up to 25% return potential

February 11, 2008: The Sensex dropped 4.57 percent within a day, as the Index shed 796.43 points. The benchmark Index fell 833 points, or 4.78 percent and closed at 16,630 on growing global worries over slowing economic expansion. The reasons cited for this fall were weak global markets and disappointing corporate earnings.

The Nifty50 index which started the week on a muted note failed to hold on to key support levels, and slipped below its crucial psychological support placed around 50-DEMA to close the week at 10,121.80, down 2.5 percent.

This has been one of the biggest weekly falls for our markets in the current calendar year. Indian market witnessed selling pressure despite positive global cues which suggest that weakness could continue for some more time.

Eventually, the Nifty went on to close almost at the lowest point of the week; courtesy of a massive cut in the latter half. The crucial support for the index is placed at 10,100-10,000 while on the higher side resistance is placed around 10,270-10,320.

Although Nifty has given positive returns in six out of last ten years, analysts advise investors to remain cautious in December as the index could slip below 10K if selling pressure continues.

“We have been sharing a notable observation in our previous articles that the Nifty was struggling around the 78.6% retracement level (10405) of the recent down move. The similar incompetence was seen in the initial part of the week,” Sameet Chavan, Chief Analyst- Technical Derivatives, Angel Broking Pvt Ltd told Moneycontrol.

“We have been advising caution and expected Nifty to slide towards the immediate junction of 10100. In-line with our anticipation, the index fell after entering a strong resistance zone of 10270 – 10320 and went on to breach the ‘Upward Sloping Trend Line’ support of 10220,” he said.

Chavan advises traders not to make any kind of bottom fishing and should rather lighten up existing longs in case of a bounce towards 10200 – 10275. Considering the recent development, we would not be surprised to see index slipping below the 10000 mark in days to come.

The reason behind picking this stock is that if we just compare the price action of the stock in the last two days with our benchmark index (Nifty), we can see a sheer outperformance as the stock managed to clock a massive rally of nearly 15 percent when the broader market has taken a solid knock.

In this course of action, we witnessed a breakout from the bullish ‘Cup and Handle’ pattern along with sizable volumes; indicating strong buying interest.

Thus, we would expect this outperformance to continue and expect the stock to head towards the short-term target of Rs.49. The stop loss can be fixed at Rs.38.25.

Post the ‘Demonetization’ correction, this ‘Tata Group’ company has never looked back as we saw more than two-fold returns in a span of 11 months.

The higher degree trend remains strongly bullish, but, in the near term, we believe that there would be some pause in the ongoing optimism.

The daily chart has already been distorted and now if we look at the weakly time frame, a copy book ‘Shooting Star’ pattern is visible; thereby increases the possibility of a near-term correction.

The short-term traders can look to sell this stock on any minor bounce for a target of Rs.589 by following a strict stop loss of Rs.630 on a closing basis.

In the last couple of weeks, the ‘Metal’ pack has seen some decent beating, especially the names like, Hindalco and Vedanta. But, somehow ‘Tata steel’ seemed to have been the lucky one, not to experience such profit booking.

Due to Friday’s correction, the stock prices violated the ‘Upward Sloping Trend Line’ on a closing basis and have confirmed bearishness in the near term.

Thus, we expect some catch-up move (in downward direction) in days to come.  One can sell this stock for a target of Rs.658 over the next 5 – 10 sessions. The stop loss should be fixed at Rs.698.

The stock closed at Rs 171.60 on the 1st December 2017 it made a 52-week low at Rs 153.53 on December 28, 2016 and a 52-week high of Rs 86.03 on June 14, 2017.

The 200-days Exponential Moving Average (EMA) of the stock on the daily chart is currently at Rs 149.47. The stock was consolidating in the range of Rs 150 to 180 levels with a positive bias and formed a” Continuation Triangle” pattern on the weekly chart, which is bullish in nature.

Last week, the stock gained over 2.5 percent and got the breakout from the pattern. It managed to close above the same along with high volume.

Referring to above cues, buying momentum can continue for the stock. Traders can buy the stock in the range of Rs 167-169 levels for the upside target of Rs 190 levels with a stop loss below Rs 157.

The stock closed at Rs 76.85 on 1st December 2017. It made a 52-week low at Rs 58.85 on August 22, 2017 and a 52-week high of Rs 127.65 on December 12, 2016.

The 200-days Exponential Moving Average (EMA) of the stock on the daily chart is currently at Rs 76. As we can see on the chart that the stock witnessed selling pressure from 120 levels and made a yearly low of 59 levels.

Then after, it consolidated in the range of 60 to 80 levels for two months and gave the breakout of same in the last week with huge volumes.

Apart from this, technical indicators such as relative strength index (RSI) and MACD are also showing strength for the stock. Therefore, one can buy in the range of Rs 75-76 levels for the upside target of Rs 90-95 levels with a stop loss below Rs 68.

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.