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Last Updated : May 23, 2019 08:21 AM IST | Source: Moneycontrol.com

Podcast | Stock picks of the day: Nifty will find support at 11,100-11,000 despite volatility on Thursday

We expect the index to resolve above its current week-high of 11,883 and gradually head towards 12,200 levels in the coming weeks.

Dharmesh Shah
 
 
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The weekly price action formed a bullish piercing line candle as buying demand emerged from 61.8 percent retracement of the last up move from 10,585 to 11,586 levels.

A follow-through strong up move during the first half of the current week saw the index recouping its entire 15 sessions decline from 11,856 to 11,108 in just five sessions signalling faster retracement and robust price structure.

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Going ahead, we expect the index to resolve above its current week high of 11,883 and gradually head towards 12,200 levels in the coming weeks as it is the 138.2 percent external retracement of mid-April-May decline (11,856 – 11,108).

The upcoming one-two sessions promises to be a volatile affair, as participants would look for cues from election outcome which will have a significant bearing on the future course of long-term direction of the financial markets.

Historically, the benchmark index has witnessed volatility of 5 to 7 percent on the election outcome date. Despite volatility, Nifty is expected to sustain above its key support of 11,100-11,000.

Historically, anxiety around the 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 have observed that Nifty exhibits 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.

The Nifty midcap staged a strong pullback after retracing 80 percent of Feb-Mar rally (16,045 – 18,463), at 16,530, indicating a conclusion of a secondary corrective phase.

The key point to highlight, both Nifty midcap and smallcap indices are on the verge of witnessing the “Golden Cross”, where 50 days SMA crosses above the long term 200-day SMA for the first time since April 2018, indicating a major shift in trend direction which makes us reinforce our positive stance on the broader market space

Here is a list of top two stocks which could give 12-13 percent return in the next six months:

Axis Bank: Buy| LTP: Rs 778| Target: Rs 870| Stop Loss: Rs 695| Upside 12 percent| Time Frame 6 months

The stock is in a secular uptrend as it is forming a higher peak and a higher trough on almost all time frames. It has registered a resolute breakout above the four-year consolidation pattern during January 2019.

The stock has been consolidating above the same in the last four months, highlighting a robust price structure. Last week it rebounded close to its neckline of the breakout area and has retraced 80 percent of the previous six weeks decline (Rs 787-716) in just three sessions, signalling strength and resumption of the primary uptrend, thus offering fresh entry opportunity.

Among the oscillators, the weekly 14-period RSI is at the cusp of generating a bullish crossover above its nine periods average thus supports the positive bias.

We expect the stock continues with its current up move and head towards Rs 870 levels as it is the price parity of the previous major up move from Rs 624 to Rs 787 as projected from the recent trough of Rs 716.

KEC International: Buy| LTP: Rs 285| Target: Rs 323| Stop Loss: Rs 269| Upside 13 percent| Time Frame one month

The share price of KEC International offers a favourable risk-reward set up to participate in the strong cyclical-led rally as it formed a higher bottom at the key technical support, thus offering a fresh entry opportunity.

The stock price retraced its four-week rally off February 2019 lows (235) by just 50 percent over subsequent eight-week period, highlighting the inherent strength and robust price structure.

The higher-base formation around the key support of Rs 270 is expected to act as a launch-pad for the next leg of up move.

Among the oscillators, the daily 14 periods RSI is in an uptrend and is seen taking support at its nine periods’ average, thus supports the positive bias in the index.

Consequently, we expect the stock to rally further to challenge its past two-quarter highs and head towards Rs 323 which is 123.6 percent Fibonacci retracement of preceding 8-week decline (Rs 313-270).

(The author is Head Technical, ICICI Direct.com Research)

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 23, 2019 08:21 am
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