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Last Updated : May 20, 2019 09:04 AM IST | Source: Moneycontrol.com

Podcast | Stock picks of the day: A favourable outcome could attract attention towards midcaps

Going ahead, 11,600 – 11,800 are the levels to watch out for in the upward direction and on the lower side, 11,286 – 11,050

Sameet Chavan
 
 
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The price action in the last few weeks was clearly divided into two parts. The first half was the rub-off effect of the previous week’s turmoil due to the US-China trade war. The second half was the hope rally ahead of the exit polls result.

On May 17, we witnessed a complete gush towards the fag end, which pushed the index significantly higher to reclaim 11,400 on closing, recouping over a percent from the previous week’s damage.

Close

We are now stepping into a crucial week. Since the election verdict is one of the most-watched, as well as influenced event, for our market; people should gear themselves up for wild swings.

For the last couple of weeks, global uncertainties have been weighing down heavily on our markets. But, now, till the time this event gets over, we may probably be decoupled from our global peers for a while.

As we all know, such events are difficult to predict. Since, they can have a massive impact on the near-term movement, one needs to take several scenarios into consideration.

Now, let’s dig into a bit of the technical. The Nifty 50 has managed to reverse from the 61.8 percent retracement of the recent up-move. Because of this, on the weekly charts, “20-EMA” has been successfully defended on a closing basis.

Going ahead, 11,600 – 11,800 are the levels to watch out for in the upward direction, and on the lower side, 11,286 – 11,050.

The major trend will get confirmed only after Nifty gives a decisive breakout from the broader range of 11,800 – 11,050.

But, if we just have to guess on one possible direction, looking at the current chart structure, we would remain hopeful as long as the “Multi-Month Trend-Line” support of 11,050 – 10,900 remains unbroken on a sustainable basis.

Below this, this is no-brainer. We may see sharp declines. On the other hand, a move beyond the higher end would resume the broader-degree uptrend.

Going by our recent articles, traders need to remain a bit light on positions, and one should rather look to accumulate marquee propositions in a staggered manner.

We would like to highlight one notable observation, the “midcap index” which has not participated in the last one-and-a-half years, seems to be in the final stage of its price-wise, as well as time-wise, correction. So, in the case of a favourable outcome, we expect midcap stocks to attract traders’ attention.

Here is a list of top two stocks which could give up to 9 percent return in the next one month:

HDFC Ltd: Buy| LTP: Rs 1,993.65| Target: Rs 2,040-2,050| Stop Loss: Rs 1,960| Upside 3 percent

This marquee name has been a consistent wealth creator for almost the last three decades in Indian markets. Recently, we witnessed a small pause to this strong multi-year run-up.

Prices have been oscillating within the boundaries of a “Rising Wedge” pattern for the last few months. In the last three-four days, the stock has been attracting strong buying around the lower-end of the wedge. On May 17, we saw a massive bump up to confirm a small breakout on the hourly chart.

Since we are heading into a bit of a volatile week, it makes sense to be with such a steady rank outperformer. Thus, we recommend buying at current levels for a target of Rs 2,040 – 2,050 and a stop loss should be fixed at Rs 1,960.

ICICI Lombard: Buy| LTP: Rs 1,120| Target: Rs 1,218| Stop Loss: Rs 1,064| Upside 9 percent

In spite of the recent turmoil in the broader markets, this stock has been an outperformer by continuously moving in a “Higher-Top Higher-Bottom” price formation.

On the daily chart after consolidation and witnessing resistance around 1,110 for three times in a month, its stock prices have finally broken above the barrier to confirm the continuation of the uptrend.

In addition, the momentum oscillator i.e. RSI, after a minor dip, has again turned up, confirming a bullish crossover with its smoothened moving average.

Looking at all the above evidence, we sense a strong northward move in the near term. We recommend buying at current levels for a target of Rs 1,218 and a stop loss should be fixed at Rs 1,064.

The author is Chief Analyst- Technical & Derivatives, Angel Broking. 

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their 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 May 20, 2019 08:52 am
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