Hadrien Mendonca IIFL
Nifty took a pause after enjoying a four-day rally, amid profit booking in select sectors on Thursday. The index broke above the crucial resistance level of 10,800 and has also broken out from a Symmetrical Triangle pattern on the daily chart.
However, the index formed a bearish Dragonfly Doji pattern on Wednesday which is an early indicator that markets may go through profit booking or a consolidation phase before the next phase of up move begins.
For the upswing to resume, the Nifty has to surpass its immediate peak of 10,925. This move would aid the index to break the consecutive lower tops that Nifty has formed and would trigger a fresh upswing towards 11,000-11,100 zone.
Going forward, any decline towards 10,700, its long-term 200-DEMA should be a good opportunity to re-enter.
The Bank Nifty has formed a bearish Dragonfly Doji pattern on the daily chart. For this pattern to get negated, Bank Nifty has to break above the 27,800 marks. On the downside, 27,450 is an important support to watch out for.
Here is a list of top three stocks which could deliver up to 8-10% returns:
Divis Labs: Buy| Target: Rs 1,625| Stop Loss: Rs 1,468| Returns 7%
The stock has been consolidating for the past two months and has finally broken out from the falling Wedge pattern on the weekly chart.
The breakout has been accompanied with a smart uptick in traded volumes. Divi’s has also managed to convincingly hold above its 50-DEMA and sustain above the same.
Apart from this, the relative strength further indicates that stock has the potential to move towards its potential target of Rs 1625 in the near-term.
Tata Motors: Buy| Target: Rs 199| Stop Loss: Rs 179.5| Returns 8%
The stock has broken out from a classic inverse head and shoulder pattern on the daily chart. Rising volumes and positive crossovers on the other momentum oscillators indicate that the current momentum is likely to get extended forward.
In addition, Tata Motors has also surpassed its 50-DEMA and also closed above the same which further accentuates our bullish stance on the stock.
UPL: Buy| Target: Rs 825| Stop Loss: Rs 744| Returns 7%
The stock has been trading consolidating for the past six weeks and has finally broken out from a Flag pattern on the weekly chart.
The momentum has been so strong that the stock has bounced back from its 21-DEMA. In addition, there has been a simultaneous breakout on the relative strength index as well, which, further indicates that UPL has the potential of moving higher towards Rs 825.
(The author is a Senior Technical Analyst, IIFL)
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