The Nifty snapped three consecutive sessions of gains and ended lower on Tuesday with losses of over half a percent at 10,633.30. Selling pressure intensified during the latter part of the day and dragged the index below 10,650 levels.
The Indian market is witnessing sustained pressure due to profit booking and weak Asian cues owing to uncertainty over the US-North Korea summit and the political crisis in Italy.
On a daily scale, the Nifty has immediate support around 10,617 (20-day exponential moving average) and 10,555 levels (38.2 percent retracement of its March to May upmove). If the index manages to sustain below these levels then the next level to watch out for will be 10,486 (50-day daily moving average), whereas 10,699 (23.6 percent retracement of the March to May upmove) will act as an immediate resistance.
The relative strength index (RSI) on the daily chart is placed at 51.87, which is showing a downward momentum. Moving average convergence divergence (MACD) is trading above the zero line with a negative cross, which indicates that the bias could remain bearish for the next few trading sessions.
India VIX ended up 0.11 percent at 13.07. An increase in VIX suggests limited upside and a consolidated down move in the market.
On the options front, maximum call open interest of 56.57 lakh contracts is seen at the 10,800 strike price, followed by 10,700, which now holds 47.84 lakh contracts. Maximum put open interest of 54.90 lakh contracts is seen at the 10,500 strike price, followed by 10,600, which now holds 40.85 lakh contracts.
As per the options data, the support level for Nifty has shifted higher in the May expiry compared to last week. Immediate support is seen around 10,600 and 10,500 levels, whereas 10,800 will act as stiff resistance.
Here is a list of top three stocks that could offer 7-12% return in the short term:
Kajaria Ceramics Ltd: Buy | Close: Rs 572 | Target: Rs 621 | Stop loss: Rs 526 | Return: 10.89%
In the weekly scale, the stock has taken a support around its 200-DMA and bounced back with moderate volumes, which suggest that the stock has made a temporary bottom around Rs 500 levels.
The key technical indicators Relative strength index (RSI) and MACD has turned upward which is signaling limited downside in the stock whereas OBV — On Balance Volume is showing an upward momentum.
Based on the above observations positional trader can buy the stock around current levels and add on dips around Rs 555-560 with a stop loss below Rs 526 (closing) for a target of Rs 600.
The Indian Hotels Company Ltd: Buy | Close: 146.30 | Target: Rs 168 | Stop loss: Rs 135 | Return: 11.72%
After making a short consolidation, the stock has given a breakout above Rs 141-142 levels on Monday with higher volumes.
The Daily Relative strength index (RSI) showing upward momentum and MACD is trading with positive crossover whereas (+) DI trading above (-) DI, which indicates that the stock has the potential to move higher.
Positional traders can buy the stock in dips at around Rs 142-145 with a stop loss below Rs 135 (closing) for the target of Rs 162.
Dabur India Ltd: BUY | Close: 385.55 | Target: Rs 408 | Stop loss: Rs 364 | Return: 7.37%
On daily scales, Dabur has taken a support around on its 23.6 percent retracement level of 23rd March to 18th May up move and bounced back with moderate volumes, which suggests that the stock has made a temporary bottom at around Rs 365 levels.
The Daily Relative strength index (RSI) showing upward move and MACD is trading above zero line and trying to crossover its signal line whereas (+) DI continuously trading above (-) DI, which indicates that the bias could remain bullish for the next few trading sessions.
Based on the above observations, Traders can buy the stock in dips around Rs 377-380 with a stop loss below Rs 364 (closing) for a target of Rs 408.Disclaimer: The author is Research Analyst, Guiness Securities. The views and investment tips expressed by investment experts 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.