Going forward, we expect the index to enter a base formation in the broad range of 11,000-11,300 and eventually extend the upmove towards 11,500 levels
The Nifty has formed a bullish candle followed by an Inside Day candle on the daily charts. Volatility is likely to remain high in the coming sessions as we approach the outcome of the General Election on May 23.
The index has lost 650 points in the last 11 sessions, leading the stochastic oscillator to approach oversold territory (at 15).
We advise traders to avoid creating a fresh short position at current levels. Going forward, we expect the index to enter a base formation in the broad range of 11,000-11,300 and eventually extend the upmove towards 11,500 levels, being the 50 percent retracement of the entire decline (11,856-11,108).
The Nifty has major support around 11,000-10,900 levels. Historically, anxiety around general elections has always triggered volatility in the past. However, markets always steer clear of it once anxiety settles down, irrespective of the outcome.
During the past three General Elections, we saw the Nifty exhibit a robust performance after the election phase, which makes us confident that volatility owing to a major event would present a good opportunity to build a long-term portfolio.
Here is a list of top two stocks which could offer 11-12 percent return in the next six months:
Tata Consultancy Services: Buy| LTP: Rs 2111| Target: Rs 2370| Stop Loss: Rs 1955| Upside 12% Time Frame 6 months
The stock in the last seven months has been consolidating in a broad range of Rs 2275-1785. The stock has already taken seven months to retraced just 50 percent of the previous six months up move from Rs 1391 to Rs 2275.
A slower retracement of the previous rally signals a robust price structure. The stock has a major support around Rs 1960 levels as it is the confluence of the 200-days EMA and 80 percent retracement of the previous up move from Rs 1882 to Rs 2266 is also placed at Rs 1960 levels.
We expect the stock to resume up move and head towards Rs 2370 levels as it is the confluence of the measuring implication of the recent consolidation breakout (2100-1800) and 123.6 percent external retracement of the last major corrective decline (2275-1784)
State Bank of India: Buy| LTP: Rs 316| Target: Rs 351| Stop Loss: Rs 290|Upside – 11%| Time Frame 6 months
The stock remains in an uptrend and is seen forming higher peak and higher trough on the long-term chart. The stock during the sharp up move of March 2019 has registered a resolute breakout above the triangular consolidation pattern containing the entire price activity of CY 2018.
In the last seven weeks, a corrective decline in the stock has formed a base above the triangular consolidation breakout area signalling strength and positive bias.
The stock in the last seven weeks has retraced less than 61.8 percent of the preceding six weeks up move (259 to 339). A slower retracement of the previous rally signals a robust price structure.
We expect the stock to continue with its up move and test levels of Rs 351 as it is the 123.6 percent external retracement of the last major corrective decline (339 to 293) placed at Rs 351 levels.
(The author is Head Technical, ICICI Direct.com Research)Disclaimer: 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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