Short-term moving average of 8-days has been trading above the 21-days moving average, which indicates short-term uptrend for the Nifty.
For the last 8 weeks, Nifty is moving in a schizophrenic manner. Every alternate week, it is moving in opposite direction. During the first two sessions of the last week, Nifty formed a double top at 10,923 levels and moved southward.
The Nifty has been moving in a rising wedge pattern on the daily chart. Last week, the index managed to close above the support level of the lower trend line of the wedge and ended the session with a bullish “Hammer” candlestick pattern on the daily chart.
Last week’s high of 10,923 resulted into lower top against the previous high of 10,985 registered on December 19, 2018. If we see daily charts, Nifty has been forming lower tops and higher bottoms.
This means that the move of the Nifty is getting contracted gradually in a Symmetrical Triangle. This setup indicates that very soon we would see one-sided move with momentum.
Any level above 10,924 would lead to a higher top preceded by higher bottom and that would trigger short coverings in the index.
However, level below 10628, which happens to be the recent bottom, would violate the bullish setup on the short-term charts.
Short term moving average of 8-days has been trading above the 21-days moving average, which indicates short-term uptrend for the Nifty.
As far as Bank Nifty is concerned, it has been outperforming and it seems that it will continue to outperform. Private as well as PSU banking stocks are looking convincing on the charts.
Support for the Bank Nifty spot index is placed at 26900, while resistances for the same are seen at 27650 and 28400.
To conclude, Nifty is contracting its moves and is likely to give one-sided move with momentum soon. Any level above 10,924 would trigger short covering, which could push Nifty towards 11,300 target. However, longs should be protected with stop loss of 10,628 on closing basis.
Here is a list of top three stocks which could give 10-16% return in 1 month:
Axis Bank: Buy| LTP: Rs 638| Target: Rs 704| Stop-Loss: Rs 603 | Return 10%
The stock price has given a Symmetrical Triangle breakout on the daily charts. It formed a higher tops and higher bottoms on the daily as well as the weekly charts.
Volumes have gradually improved along with the rise in prices. The stock price has been trading above its 20, 50, 100 and 200-DMA. Oscillators and indicators setup is fairly bullish, and the banking sector is likely to outperform.
Considering the technical evidences discussed above, we recommend buying the stock between 638 and 610 for the targets of 704 and 755, keeping a stop loss below Rs 603 on closing basis.
Action Construction: Buy| LTP: Rs 99| Target: Rs 113| Stop-Loss: Rs 90 | Return 14%
The stock is trading 52 percent lower than its January 2018 high of 204. On the long-term charts, the stock has turned extremely oversold.
For the last 3 months, the stock has been trading in a consolidation zone of 85 to 105. In the month of October and December 2018, the stock took support on the upward sloping trend line on the weekly charts. This trend line has acted nicely in the past.
For the week ended 4th Jan 2018, the stock broke out from the contracting range on the daily charts with a higher delivery percentage and higher volumes.
Indicators like MACD and Oscillator like RSI has turned bullish on the weekly charts. The stock price has recently taken support on its 200-week Exponential moving average and reversed north.
Considering the technical evidences discussed above, we recommend buying the stock at CMP and average it at 95, for the target of 113, and keeping a stop loss at Rs 90 on a closing basis.
Coromandel International: Buy| LTP: Rs 460| Target: Rs 535| Stop-Loss: Rs 420| Return 16%
The stock formed an Inverse Head and Shoulder breakout on the weekly charts. The stock formed a higher tops and higher bottom formation on the daily as well as the weekly charts.
Volume activity is gradually improving along with the price rise. The stock price has surpassed the resistance level of 50-week EMA. The stock price has surpassed the resistance of its 200-DMA.
Considering the technical evidences discussed above, we recommend buying the stock at CMP for the target of 535, and keeping a stop loss at 420 on closing basis.
(The author is Senior Technical Analyst at HDFC Securities)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.