Nifty showing fatigue at higher levels; 5 stocks which could give up to 15% return

Traders are advised to take fresh positions on the Nifty on a retracement towards 9,160. There is no need to run after breakouts. These breakouts may be the final attempt to rally before the market turns quiet and move sideways.

Top five ideas to buy or sell based on technical factors in the short term:

Infosys: BUY| Target Rs 1020| Stop Loss Rs900| Return 10%

IT stocks have been consolidating at lower levels. But, Infosys appears to be making all the right moves on the technical charts. It under-performed for the entire period of 2016 as the price broke below the support of the ascending trendline and it made a low of Rs901 (back in January 2017).

Currently, it is hovering around its 50-monthly moving average. Since November 2017, on numerous occasions, the stock has taken support around the midpoint of the current gann channel (i.e. 901).

Pullback thereafter has been restricted towards Rs1,050. Ratio chart of IT index against the Nifty index is showing early signs of traction. At current levels, Infosys provides an ideal risk reward ratio to create fresh longs.

A move above Rs935 would bring an end to consolidation at the bottom of last two weeks. Based on above rationale, IIFL recommends a buy on Infosys above Rs935 with a stop loss of Rs900 for a target of Rs1,020.

Ambuja Cements: BUY| Target Rs 277| Stop Loss Rs 240| Return 11%

It has been consolidating at the top after a strong rally from the last week of March 2017 to the second week of April 2017. Thereafter, it retraced 61.8% of the entire move from Rs226 to Rs253 before reversing the trend.

The same also coincided with the support of its 35-DMA. Since last two weeks, the sideways consolidation at the top can be termed as bullish consolidation. The outcome of such sideways movement are dealt positively during an uptrend.

Moreover, it continues to trade above the gann number of 225. Sustenance above the same for last one month suggests that the stock has moved into a new orbit.

However, the fresh breakout from the recent sideways activity above Rs252 would provide the much-needed ammunition for the stock to ascend higher. Based on above parameters, IIFL recommends a buy on Ambuja Cements above Rs252 with a stop loss of Rs240 and for a target of Rs277.

Shriram Transport Finance: SELL| Target Rs 980| Stop Loss 1070| Return 5%

The stock underperformed the market and lost 3 percent so far in the month of April after making a high of Rs1,120. Thereafter, it slipped below Rs1,089 (i.e. four-digit gann number) which led to a strong reversal.

Prior to Thursday’s breakdown, the stock was stuck in a limbo at the top of its trading range. Inability to break past the critical gann level on the upside and support of 35-DMA contributed to the sideways movement.

The inability of the stock to conquer ground above its previous top reinforces a negative trend in the counter. Recent correction is in place after it gave a breakdown from the consolidation at the top.

Based on above rationales, IIFL recommend a short on Shriram Transport Finance May Futs below Rs1,045 with a stop loss of Rs1,070 and target of Rs980.

Indo Count Industries: BUY| Target Rs 234| Stop Loss Rs 194| Return 15%

With a breakout from a pennant pattern on the weekly chart, Indo Count Industries (ICIL) is likely to replicate the movement it had in the month of March 2017. It rallied sharply from low of Rs158 to a high of Rs205 before going into a phase of consolidation, which led to a formation of a pennant.

This pattern is normally found in an uptrend. A descending trend line extended from the peak of Rs205 has been pierced on the upside in this week’s trade, thus putting an end to the short-term downtrend.

Also in the process, the stock regained ground above the midpoint of current gann channel. Thursday’s move of 5% with above average volumes suggests the beginning of the previous uptrend.

IIFL expects the stock to witness follow-up buying and build on recent momentum. Buy ICIL above Rs205 with SL of Rs194 for a target of Rs234.

IDFC: BUY| Target Rs 66| Stop Loss 59| Return 7%

IDFC has been in a strong uptrend from March 2014, after hitting a low of Rs51. Since then, the stock prices have been rallying in ‘rising channel’ with support levels placed at its 21-DEMA.

It has been maintaining its sequence of higher tops since last four weeks and so far there is no sign of a reversal in the ongoing bull market for IDFC.

In the ongoing rally, the stock also managed to surpass the previous peak of Rs61 seen earlier in January 2017, suggesting strength in the recent upmove.

Moreover, in Thursday’s trade, it attempted a breakout from the rising channel structure. Breakout is also seen from head & shoulders pattern on the broader charts.

So back to back breakout on different time frames corroborates our positive view on the stock. Based on above parameters, IIFL recommends a buy on IDFC above 61.50 with a stop loss of Rs59 and for a target of Rs66.

Disclaimer: The author is Head of Technical Research – IIFL Wealth & Asset Management. 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.