Dharmesh Shah
Equity benchmarks last week formed a strong bull candle and almost tested our earmarked target of 10,950, which is the 80 percent retracement level of the major leg of the decline (11,172-9,952).
Going forward, we expect the Nifty to enter into a healthy consolidation phase in a broader range of 10,950–10,700 over the coming sessions to form a higher base. Stock specific activity is likely to continue as we are going through the Q4 earnings season.
Over the past eight weeks, the Nifty has rallied almost 10 percent from its March low of 9,952, leading the weekly stochastic oscillator to trade in the overbought zone. Therefore, at current levels, the Nifty is likely to consolidate in a broader range of 10,950–10,700.
Considering the resilience of the current upmove, we shift the support base upward to 10,700, as it is the confluence of:
* 23.6% retracement (10,699) of the last upmove from 9,952 to 10,929
* Since March the index has not corrected over two percent, which is around 10,710 levels from Tuesday’s high of 10,929.
Structurally, the index remains on a strong footing, amid a robust price structure, as it has been seeing follow-through strength after forming a higher high and a higher low on the monthly chart for the first time since January, indicating resumption of an uptrend.
Thus, any breather from hereon would help the Nifty to form a higher base formation that would set the stage for the next leg of the upmove.
Here is a list of top three stocks that could deliver up to 21% return in the next six months:
Apollo Tyres: Buy| CMP: Rs 294| Target: Rs 340| Stop loss: Rs 263| Return 16% | Timeframe 6 months
The share price of Apollo Tyres remains in a strong uptrend forming a higher peak and higher trough representing persistent demand at elevated levels.
The stock has formed an all-time high of Rs 307 during the middle of April 2018. The corrective decline from all-time high saw the stock to rebound and took support at major breakout area indicating resumption of the primary uptrend thereby providing a fresh entry opportunity.
Time-wise, the stock took just nine weeks to retrace its entire previous decline of 26-weeks from Rs 288 to Rs 228. Faster retracement of the major falling segment in less than half the time interval confirms the overall positive price structure and reinstates bullish momentum, which augurs well for the stock.
The stock has major support levels placed around Rs 260-265 as it is the confluence of the following technical parameters:
a) The lower band of the rising channel containing the entire up move since February 2017 around Rs 264
b) The long-term rising 50 weeks EMA, which has acted as strong support for the stock since August 2016
c) 61.8% retracement of the previous major up move (228-307) is placed around | 260 levels
We expect the stock to head higher towards Rs 350 in the medium term as it is the price parity of previous up move from Rs 230 to Rs 307 added to the recent trough of Rs 274 project upside towards Rs 350 levels in the medium-term.
Pfizer: Buy| CMP: Rs 2430| Target: Rs 2960| Stop loss: Rs 2,165| Return 21% | Timeframe 6 months
The share price of Pfizer India is in a strong uptrend forming a rising peak and rising trough and has recently registered a Flag breakout on the monthly chart highlighting the strength in the uptrend.
The stock offers a fresh entry opportunity at current levels from a medium-term perspective. It entered a sideways consolidation mode after hitting a 52-week high of Rs 2,369 in mid-February 2018 and, thereafter, oscillated in a price band of Rs 2,350 to Rs 2,050 in the last three months.
Pictorially, this sideways consolidation has taken the shape of a bullish Flag pattern as highlighted in the adjoining chart. The resolute breakout from the bullish Flag pattern in current months trade signals conclusion of the secondary corrective phase and resumption of the primary uptrend thus provides fresh entry opportunity.
The stock has major support in the range of Rs 2,150-2,200 being the confluence of 80 percent retracement of the previous up move from Rs 2,050 to Rs 2,549 and 12 months EMA.
Time-wise, the stock has seen a faster retracement of the last falling segment as nine weeks decline from Rs 2,369 to 2,080 was completely retraced in just four weeks signaling a robust price structure.
Based on the above technical observation, the stock is likely to continue with a positive bias and head towards Rs 2,978 levels being the measuring implication of the flag breakout.
The height of the pole of the flag 688 points (2369-1681=688) added to the breakout area of Rs 2300 which projects an upside towards Rs 2978 (2300+ 688=2978)
Berger Paints: Buy| CMP: Rs 281| Target: Rs 313| Stop loss: Rs 264| Return 11% | Timeframe 1 month
The share price of Berger Paints remains in an uptrend forming a higher peak and higher troughs. It has witnessed a strong rebounded on last Friday as it took support at the 38.2% retracement of previous up move (232- 287) placed at Rs 267 levels signalling positive bias.
The up move was accompanied by a strong volume of more than 7x the 200 days average volume of 7 lakh share per day highlighting larger participation at support level thus offering a fresh entry opportunity to ride the next up move in the stock.
Among oscillators, the daily 14 periods RSI has recently generated a bullish crossover indicating positive bias in short-term.
We expect the stock to maintain positive bias and head towards Rs 314 levels being price equality to the previous rally from Rs 238 to Rs 287 added to the recent trough of Rs 265 project upside towards Rs 314 levels
Disclaimer: The author is Head Technical, AVP at ICICI Direct.com Research. 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.
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