Hadrien Mendonca
The June series and specifically this week has been vicious for equity markets as indices saw deep cuts in the past few days. The midcap and smallcap space continued to get butchered, but heavyweights have started feeling the heat and participated in the current downfall.
Markets cracked as there seems to be a lot more challenges than opportunities at the current juncture. Rising US-China trade war concerns; weakening rupee, which hit a new low against the dollar on Thursday; and higher crude oil prices are all major factors that dampened sentiment on the street.
The Nifty fell sharply on Wednesday after forming a Bearish Engulfing Pattern on the daily chart. We also observed follow up selling pressure on Thursday, which dragged the index below the 10,600 levels. However, 10,550 played an important support zone. If the index fails to stay above the support area in the next few trading sessions, further selling cannot be ruled out.
Bank Nifty too is indicating weakness. The Nifty private bank index, which was resilient until now, has also witnessed a Symmetrical Triangle breakdown on the daily chart. State run banks continue to remain the weakest of the lot.
The Nifty Metal index is placed at a make or break point. Our weekly chart analysis indicates that the index has reached the declining trend line support zone of 3,330. If the index manages to hold above the mentioned support area, then it is likely that the metal index may stage a short-term recovery. However, if it fails to hold then metals may lose its shine further.
Here is a list of top 3 stocks that could return 8% in 1-2 months:
JSW Steel Ltd: Buy| Target: Rs 348| Stop Loss Rs 310.5| Returns 7.7%
Our weekly chart analysis indicates that JSW Steel has reached its rising trend line support zone. In addition, there is also a horizontal neckline of the previous breakout acting as a strong support area on the daily chart.
The relative strength too seems to be bouncing before hitting the oversold zone, which further accentuates our stance of a recovery in the stock.
Godrej Consumer Products: Buy| Target: Rs 1,306| Stop Loss: Rs 1,170| Returns 7.5%
The stock has been in a sublime uptrend and our weekly chart analysis indicates that Godrej Consumer has also broken out from a rising channel pattern.
The breakout has been accompanied with a smart uptick in traded volumes too. In addition, the stock has also managed to sustain above its short-term averages. Every decline in such a solid up trending stock should be an opportunity to accumulate.
Infosys Ltd: Buy| Target: Rs 1,386| Stop Loss: Rs 1,233| Returns 8%
The stock has been very stable and is gaining strength quite gradually. It continues to defy the heavy selling pressure that is seen across sectors which provides comfort.
In addition, if the stock manages to sustain above the Rs 1,275 which is the breakout zone on the monthly closing basis, that would trigger a multi-year breakout for Infosys. All the parameters at the current juncture merit a Buy on the IT heavyweight.
Disclaimer: The author is Senior Technical Analyst, IIFL. The views and investment tips expressed by investment expert 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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