Nandish Shah of HDFC Securities advised investors to go long in Nifty with a stop loss of 10,800 levels
The Nifty50 snapped back 200 points from the lows on Monday to reclaim its crucial resistance of 11,000 with gains of 78 points.
The Nifty50 has already fallen 900 points or 8 percent, while the BankNifty has fallen nearly 3,700 points or 13 percent from their all-time highs registered on August 28, 2018.
At 10,850, the Nifty has completed 50 percent retracement of the entire upswing seen from 9,952 (March 23, 2018) to 11,760 (August 28, 2018).
A 200-DMA support for Nifty is also placed at 10,770. There has been a long-term upward sloping trend adjoining monthly lows of February 2016 and December 2016 and March 2018.
This trend line also projects strong support at 10,800. These technical Indicators indicate that the Nifty has reached to a strong support region of 10,770-10,850.
In the derivative market, we had started October series with Stock Futures’ Open Interest at eleven months low at 467 crore shares. The lower Open Interest (OI) indicates markets are light in terms of positions as compared to the last few series which augured well for the markets.
Moreover, during the first two days of the August series, we had seen long positions being built in the both Nifty and Bank Nifty futures’ from lower levels.
The option Put writing seen at 10,800 indicates that 10800-10850 level is likely to act as an immediate support for the market.
Considering the technical and derivative evidence discussed above, we believe that, the short-term pullback rally is on the cards and the bottom of 10,800 should not be violated anytime soon.
Therefore, our advice to investors would be to go long in Nifty with a stop loss at 10,800. On the higher side Nifty is likely to find an immediate resistance around 11,250-11,300 where Calls have been written.
Here is a list of top three stock ideas which could give 8-9 percent return in one month:
ABB: Buy| LTP: Rs 1,423| Target: Rs 1,540 | Stop loss: Rs 1,360| Return: 8 percent
ABB has been one of the outperformers during the month of September where it gained by 8 percent while the BSE Capital good Index has fallen by 10 percent.
The stock is trading above its 5 and 20-days simple moving averages which indicates that the primary trend is positive for the stock.
The stock price is taking support around its 200-days SMA in the last few days. We believe that the recent correction in the stock price is a running correction in the overall uptrend which is a good buying opportunity.
Therefore, we recommend investors to accumulate ABB in the range of Rs 1,390-1,423 for the upside target of Rs 1,540, and a stop loss placed below Rs 1,360.
Deepak Nitrite: Buy| LTP: 284| Target: Rs 310 | Stop loss: Rs 268| Return: 9 percent
During the last week, Deepak Nitrite had given a breakout on the daily chart by closing above the crucial resistance of Rs 290 with higher volumes.
The primary trend of the stock is positive where it is trading near its all-time high level while the Nifty midcap and small-cap index have fallen by 18 percent and 32 percent, respectively, year-to-date (YTD).
Deepak Nitrite is also trading above its 20 and 200-day simple moving averages which indicates a bullish trend for the medium to long-term.
The stock price has been making higher-top-higher-bottom formation on the daily chart. Therefore, we recommend accumulating Deepak Nitrite in the range of Rs 275-284 for the upside target of Rs 310, and a stop loss placed below Rs 268.
Exide Industries: Buy| LTP: 263| Target: Rs 285 | Stop loss: Rs 250| Return: 8 percent
After the recent correction of about 14 percent from the highs, the stock price has now reached its support placed around Rs 250.
The primary trend of the stock is still positive. The stock price is also trading above its 200-day SMA which is a bullish sign.
The momentum indicators and Oscillators are indicating strength in the stock for the short to medium-term. We believe that recent correction in the stock price is a running correction in the overall uptrend which is a good buying opportunity.
Therefore, we recommend investors to buy Exide Industries for the upside target of Rs 285 and place a stop loss below Rs 250.Disclaimer: The author is a Technical & Derivatives Analyst at 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.