A move above 11,700 could be an extremely strong sign for the bulls because above 11,700 the Nifty has the potential to make a record high
Last week, we were of the opinion that the domestic market could witness selling pressure at higher levels due to various technical reasons.
However, during the past few sessions, the Nifty surged from 11,200 to almost 11,600. Now, the index has been sustaining well above its 200-day simple moving average (SMA).
Also, it has managed to clear the resistance of 11,555. Going forward, in order to maintain the upside momentum and enter a fresh bull run, the Nifty will have to clear the final hurdles of 11,600 and 11,700.
The first is the placement of falling trend line formed by joining the swing highs of 12,103 (June) and 11,982 (July) and the latter is 11,700 which is the previous swing high.
A move above 11,700 could be an extremely strong sign for the bulls because above 11,700 the Nifty has the potential to make a record high.
Hence, we would advise traders to initiate fresh longs once Nifty crosses the mentioned zone. On the downside, its intermediate support has shifted to 11,400.
A move below the same might halt the upside momentum and we could witness some profit booking. Meanwhile, the Nifty Bank index has been lagging behind.
In order to stay higher, the market will need participation from the banking stocks. So, one should keep a watch on this space too.
Here is a list of top three stocks which could offer 6-10 percent returns in the next one-to-three months:
LIC Housing Finance: Buy| CMP: Rs 381| Target: Rs. 415|Stop Loss: Rs 355 | Upside 9%
Since July 2019, the stock has been under selling spree and corrected more than 35 percent from the top.
Thus at this juncture, LIC Housing has been trading in oversold territory. In addition, the stock has gained ground near the multiple (and multiyear) support level of Rs 360.
The support coincides with the placement of falling trend line support formed by joining the swing lows of Rs 458 (Nov, 2016) and Rs 389 (Sept, 2018). This indicates the possibility of reversal.
Traders are advised to buy the stock between Rs 380 - 370 for the upside target of Rs. 415, and a stop-loss of Rs. 355. (1–2 months)
Just Dial: Buy| CMP: Rs 605 | Target: Rs 645 |Stop Loss: Rs 570 | Upside 6%
Similar to LIC Housing, even Just Dial has been falling from July 2019 and has entered an oversold zone on the daily chart.
On the daily chart, we are witnessing a bullish harmonic AB=CD pattern which has a potential reversal zone near Rs 580 mark.
Recently, the stock rallied from Rs 580 zone which indicates some demand near the completion of the pattern.
Traders are advised to buy the stock between 600 - 590 for the upside target of Rs. 645, and a stop-loss of Rs. 570. (1–3 weeks)
Blue Star: Buy| CMP: Rs 827 | Target: Rs 915 |Stop Loss: Rs 760 | Upside +10.64%
The stock has been an outperformer from the MIDCAP space since it is trading near its lifetime high despite so much volatility in the market.
Considering its weekly chart, we are observing a breakout that resembles a bullish ‘Inverse Head and Shoulder’ pattern.
The theoretical target for the pattern comes around Rs 1050 while the stock is still quoting near Rs 800 mark.
Also, the placements of momentum oscillators indicate further upside from here on.
Traders are advised to buy the stock between Rs 820 and Rs 810 for the upside target of Rs 915, and a stop loss of Rs 760. (1–2 months).
(The author is Sr. Technical Analyst at IndiaNivesh Securities Limited)Disclaimer: 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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.