Vinay Rajani
For the last 6 sessions, the Nifty has been trading in a narrow range of 10,750-10,893. Information technology, pharmaceuticals and fast moving consumer goods (FMCG) sectors have remained major pockets of strength.
Reliance Industries, which carries more than 7.5 percent weight in the Nifty, has also been a major contributor. Midcaps and smallcaps have been witnessing selling pressure. Market breadth has remained negative for the last four consecutive sessions.
The Nifty is trading in a symmetrical triangle pattern on the daily charts. The downward sloping trend line, adjoining the highs of January 29 (11,171) and January 15 (10,929) is projecting short term resistance at around 10,900 levels.
Any level above this would confirm the bullish symmetrical triangle breakout. The index is currently trading above its 20, 50, 100 and 200-day daily moving average, indicating a bullish trend on all time frames. It has been forming higher tops and bottoms on the daily charts, confirming a bullish set up. Oscillators have been showing a bullish set up on the daily and weekly charts.
The 61.8 percent and 100 percent Fibonacci extension levels of the entire move seen from 9,951 (March bottom) to 10,929 (May top) and from 10,929 to 10,417 (May bottom) projects the next targets for Nifty at 11,021 and 11,395, respectively. At this point of time, the Nifty is consolidating in a 10,700 to 10,900 range. A close above 10,900 would result in a breakout in Nifty, and till that happens, it will act as a resistance.
Long build up is seen in Nifty futures
Long build up was seen in the Nifty futures’ during last week, where open interest rose by 11 percent compared to the Nifty, which gained 0.5 percent. Short build up was seen in the Bank Nifty futures, where open interest rose 5 percent, with Bank Nifty index falling 0.13 percent.
Put writing was seen at 10,700-10,800, while calls have been written at 11,100. Nifty open interest put call ratio rose sharply to 1.55 levels on Monday from 1.49 levels recorded last week. Rise in PCR is largely on the back of put writing at 10,700 and 10,800 levels, which added 14.90 and 23.80 lakh shares in OI, respectively.
Moreover, 10,700 level is seeing the highest OI among Nifty June Put options, indicating the level should act as strong support in coming days. Long build up in the Nifty futures, rise in PCR on the back of put writing at 10,700-10,800 levels and buying by foreign institutional investors in index options and stock futures during last week indicates that one should remain optimistic on the markets in coming weeks.
Considering the technical and derivative evidence discussed above, the existing Nifty trend is bullish and the same is likely to continue. Above 10,900, the next possible target for the Nifty is seen at 11,021 and 11,395. Positional support for the same is placed at 10,600. Any dips from the current levels should be accumulated with a stop loss below 10,700.
Here is a list of 3 stocks that could return 7-8% return in the short term:
UBL: Buy| LTP: Rs 1,284| Target: Rs 1,370 | Stop-loss: Rs 1230 | Return 7%
The stock price has recently registered a new all-time and 52-week high at Rs 1,310. For the last 5 session’s price has been consolidating in the range of Rs 1,256-1,290 on a closing basis.
The primary trend of the stock has been bullish with higher tops and higher bottoms on the daily and weekly charts. On the weekly charts, the stock has also given breakout from bullish inverse head and shoulder, indicating a continuation of an uptrend.
The stock price is currently placed above all important moving average parameters. We recommend buying UBL for the upside target of Rs 1,370, and a stop loss below Rs 1,230.
Tata Elxsi Ltd: Buy| LTP: Rs 1,296| Target: Rs 1,390 | Stop loss: Rs 1,240 | Return 7%
The IT Sector has remained a major contributor to holding the recent market strength. The Midcap IT stock, Tata Elxsi has recently registered a new all-time high with decent volumes.
The stock broke out from the ascending triangle on the daily chart, indicating the continuation of the primary uptrend.
Oscillators have been holding their bullish setup on the weekly and monthly charts. We recommend buying Tata Elxsi for the upside target of Rs 1,390, and a stop loss below Rs 1,240.
Jyothy Lab: Buy| LTP: Rs 464 | Target: Rs 502| Stop loss: Rs 445 | Return 8%
In the month of June 2016, the stock broke out from the long-term multi-month consolidation and registered an all-time high at Rs 471. Thereafter stock witnessed healthy correction of 16% from Rs 471 to Rs 396 in the next 2 weeks.
On 6th June 2018, the stock found support at Rs 396 and bounced sharply to surpass previous top of Rs 471 and registered a new all-time high placed at Rs 487 on 12th June 2018.
FMCG sector has been outperforming and Jyothi lab is also likely to extend the gains for investors. We recommend buying Jyothi Lab for the target of Rs 502 and keep a stop loss below Rs 445.
Disclaimer: The author is Technical Analyst, PCG Desk, HDFC Securities. 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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