The Nifty on October 16 traded in a narrow range and formed a Doji candlestick pattern, which shows indecision among traders.
The current ongoing formation in the benchmark index suggests a V-shaped reversal pattern that will get completed around 11,700 levels.
In the last two weeks, the Nifty was trading between its 50 and 100-day simple moving average (SMA) on the daily interval.
On October 16 due to a gap-up opening above 11,400, it witnessed a breakout on the upper side of the band, which is a positive sign.
Going forward, 11,100 will act as immediate support for the Nifty. On the higher side, 11,700 will be the next resistance for the benchmark index.
A decisive break above 11,700 will definitely offer a range breakout, which will further open the gates for the index to retest 12,000 levels. A failure to sustain above the 11,100 mark will bring a fresh round of selling in the market.
Here is a list of top three stocks which could offer 6-8 percent returns in the next three-to-four weeks:
Godrej Consumer Products: Buy| CMP: Rs 706| Target Rs: 766 |Stop Loss Rs 670|Upside 8.5%
Godrej Consumer has witnessed falling trendline breakout on the daily time frame. The stock is currently trading above its medium-term exponential moving averages (20, 50, 100-DMA) on the daily timeline which is a positive sign for the counter.
Recently, on the higher time frame (weekly), the stock has given a “Falling Wedge Pattern” breakout at Rs 680 levels. The initial tendency of a Falling Wedge pattern is to give a reversal from the ongoing bearish momentum.
The momentum oscillator, RSI (14) is well poised above 60 levels with a positive crossover which shows that bullish momentum can be continued further.
Traders can accumulate the stock in the range of Rs 703 - 709 for the target of Rs 766, and stop loss below Rs 670 on a daily closing basis.
Finolex Industries Ltd: Buy| LTP: Rs 599.55| Buy range Rs 580-570| Target: Rs 638 | Stop Loss Rs 550 | Upside 6%
The stock has been consistently trading above its long-term moving averages on the daily interval and is seen trading with a formation of the higher highs and higher bottom since May 2019.
On the weekly time frame, the stock has witnessed a breakout above a “Falling Channel Pattern” which is placed at around Rs 580 levels.
A recent spurt in prices was supported with above-average volumes, which adds more confirmation for a valid breakout. The majority of technical indicators and oscillators are suggesting that the momentum is likely to continue.
Traders can accumulate the stock on dips in a range of Rs 580 – 570, for the target of Rs 638, and a stop loss below Rs 550 on a daily closing basis.
Exide Industries: Sell| LTP: Rs 182.95 | Target Rs: 167|Stop Loss: Rs 192 | Downside 8%
Since August 2018, Exide Industries is trading in a lower high, and lower low formation till date. The prices have recently capped near its trendline resistance and have resumed their downward journey.
The stock is currently trading in a Falling Channel Pattern on the weekly interval. Since the recent past, 100-EMA is acting as a major resistance for the stock and currently it is trading well below its 20, 50 & 100-EMA on the weekly charts which is negative for the prices.
The momentum oscillator RSI (14) is in a bearish range shift reading in the range of 50 – 25 with negative crossover, which is negative for the counter.
The stock may be sold in the range of Rs 181.50 - 184 for the target of Rs 167, and a stop loss above Rs 192.
(The author is Technical Research Analyst, Bonanza Portfolio Ltd)
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