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Last Updated : Apr 19, 2018 12:46 PM IST | Source: Moneycontrol.com

Podcast | Nifty unlikely to breach 10,300 in a hurry; 3 stocks that could return up to 17%

Here is a list of top three stocks which could give up to 17% return in the next 6 months.

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Dharmesh Shah

The Nifty has formed the ‘Three White Soldiers’ candlestick pattern over the last three weeks, indicating a positive turnaround in sentiment after the index found support at its 52-week exponential moving average of 9,950.

We expect the Nifty to maintain its rising trajectory amid stock specific action, and extend the current up move towards 10,630, its previous major high seen on February 27, this coming week.

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A key feature of the Nifty's current rally is that its quantum (640 points) is twice that of the previous two significant rallies (around 330 points each). This is indicative of a structural change.

In terms of price performance, the strength currently being witnessed across sectors reflects a renewal of investor confidence. Over the past three weeks, the index has risen by close to 640 points from its March low of 9,952.

As a result, the daily stochastic oscillator traded in the overbought zone (currently at 88), indicating that the index may go through a phase of healthy consolidation between 10,630 and 10,300 amid the stock specific action that typically underscores an earnings season.

However, the overall bias is still positive as the Nifty continues to trade in an upward sloping channel. We do not expect the market to fall below 10,300 in the near term because any dip from hereon should be used as an opportunity to add positions.

We have revised the immediate support base for the index higher to around 10,300 based on the following technical observations:

  • The support zone for the rising channel, drawn adjoining the index's March low of 9,952 and April low of 10,111, is placed at 10,310

  • 10,300 is also the point at which the retracement of the Nifty's recent rally (9,952 -10,520) hits the crucial 38.2 percent level.

  • Last week’s low is also placed at 10,330


Here is a list of top three stocks which could give up to 17 percent return in the next 6 months:

Bajaj Finserv: BUY| CMP Rs 5,372| Target Rs 6,095| Stop Loss Rs 5,190| Return 13%| Time Frame: 6 months

The stock, after hitting a lifetime high of Rs 5,790 in September 2017, has entered a secondary corrective phase as it discounted excesses built into the previous rally and factored in concerns over rising bond yields.

This past week, the stock broke out of its basing pattern of the last six months, signalling the end of its corrective phase and beginning of a fresh rally, which in turn provides a new opportunity to enter it.

The price decline from a lifetime high and subsequent consolidation phase over the past six months fulfill all properties of a corrective pattern within a primary uptrend as it retraced the preceding four-month rally just by 50% over seven months indicating robustness in the price structure

Significantly, the consolidation over past six months anchored at the key support of 4800 as it is the confluence of:

a) 50 percent retracement of the previous up move (3801-5790)

b) The long-term rising 52 weeks EMA, which has been held since CY 2013

The stock has immediate support at Rs5200 as it is the 61.8% retracement of the most recent rally.

We expect the stock to resume uptrend after the current consolidation breakout and head towards Rs6100 in the medium term.

The target is based on the confluence of the breakout (5450-4800=650 points added to breakout of 5450) and 123.6 percent external retracement of September 2017 – February 2018 decline (5790-4500) placed at 6095

Munjal Showa: BUY| CMP – 229| Target Rs269| Stop Loss Rs208| Return 17%| Time Frame 6 months

The share price of Munjal Showa has witnessed a strong up move in CY17 from 171 to all-time high of | 313. The stock has witnessed a sharp decline in the last three months.

In the process, it tested the major support area around 200. A sharp rebound from the support level during the previous week, recouping last four week’s price decline, is signalling strength, a reversal of the secondary corrective decline and resumption of the primary uptrend.

The stock is currently placed at the cusp of a falling channel breakout containing the entire corrective decline of the last three months signalling positive bias. Thus, it provides a fresh entry opportunity for medium term investors

In the last two weeks, the stock has been witnessing a rebound from the major support area of | 200 as it is the confluence of the following technical parameters:

a) 80 percent retracement of the entire CY17 up move
(171-313) is placed around | 200 levels
b) The long-term trend line support joining lows of CY16 (| 137) and CY17 (| 171) placed around | 200 levels

Among oscillators, the weekly 14 period’s RSI has recently rebounded from its previous low, generating a bullish crossover above its nine period’s average. Thus, it supports the positive bias in the stock in the medium term.

Based on the above technical observation, we expect the stock to continue its current up move and test levels of 269 being the 80% retracement of the entire previous decline (313 to 198) at 269.

PNC Infratech: BUY| CMP Rs175| Target Rs205| Stop Loss Rs166| Return 17% Time Frame 1 month

The share price of PNC Infratech remains in an uptrend forming a rising peak and rising trough on the weekly chart. The stock has rallied to an all-time high of 228 in December 2018. Since then, it has been in a corrective decline for the last four months.

The recent price activity suggests the corrective decline has approached maturity and the stock is likely to resume fresh up move.

The stock has recently rebounded from the support area of | 150-155 being the confluence of the 52 weeks EMA and 80% retracement of the previous up move (| 130 - 228).

The sharp up move in the last two weeks from the support area signals a reversal of the corrective trend and offers a fresh entry opportunity.

Among the oscillators, the daily MACD remains in an uptrend and is seen sustaining above its signal line thus supports the continuation of the positive trend in the stock.

We expect the stock to continue with its current up move and test levels of | 211 being the 80% retracement of the entire decline (228 – 148).

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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First Published on Apr 19, 2018 10:05 am
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