We expect stock-specific performance to continue as earnings season gathers pace while we expect the index to strengthen above December-high of 10,985, says Dharmesh Shah of ICICI Direct.com.
Nifty, during the current week, has registered a breakout above the symmetrical triangle formed since mid-December 2018 high of 10,985. The index has now retraced past three sessions.
Going forward, we expect stock-specific performance to continue as earnings season gathers pace while we expect the index to strengthen above December-high (10,985) and eventually head towards the earmarked target of 11,100 in coming weeks as it is the confluence of:
A) 61.8% retracement of entire corrective phase since August 2018 (11,760–10,005), at 11,090.
B) 161.8% external retracement of last decline (10,924-10,629), at 11,106
Structurally, the index since October low (10,005) has exhibited tendency of not retracing its preceding up the leg for more than 61.8% (on a closing basis). While time-wise, each of the corrective declines has not lasted for more than three consecutive sessions.
Even during the current week, the index rebounded from the 61.8% retracement of the previous up move (10,628-10,870) and also maintained its rhythm of not correcting for more than three successive sessions signalling strength and formation of the sequential higher bottom in the index.
The formation of higher trough and strength in the current up move in the index along with the structural improvement of index heavyweights make us confident on upholding the support at 10,600, as it is a confluence of:
A) upward sloping trend line drawn adjoining lows of October, December of 10,005, 10,334, respectively, is around 10,590
B) 61.8% retracement of last major up move 10,334–10,985, at 10,582
C) Early January 2019 swing low placed at 10,629
The broader markets continued their stock-specific action, as we enter the Q3FY19 result season, indicating healthy consolidation.
Here is a list of top two stocks which could give 16-17% return in the next 1-6 months:
Bharti Airtel: Buy| LTP: Rs 332 Target: 388| Stop Loss: Rs 302| Upside 17%| Time Frame 6 months
The share price of Bharti Airtel has formed a strong base in the last three months around the major support area of Rs 285-305. We believe that the stock has undergone a healthy consolidation around the support area while absorbing all the negative news flows.
The major support area around Rs 300 is the confluence of the following:
A) the multiple bottoms since the CY13 is placed around | 290-300 levels as can be seen in the adjacent chart
B) the 80% retracement of the previous major up move from (| 216 to 564) is placed around 290
The strong up move in the last month from the support area has generated a breakout from the falling channel containing the entire decline since November 2017 high of Rs 564 signalling a reversal of the corrective trend and offers a fresh entry opportunity to ride the next up move in the stock
We expect the stock to continue its current up move and head towards 388 in the medium-term as it is the 38.2% retracement of the entire decline of the last 13 months (564-277) placed at Rs 388.
Siemens: Buy| LTP: Rs 1,062| Target: Rs 1,230| Stop Loss: 961| Upside 16%| Time Frame 6 months
The share price of Siemens has formed a base after retracing 61.8% of the last major up move seen during August 2013–2015 (414–1560), at Rs 852. The secondary phase of corrections is an integral part of the primary uptrend that helps to cool off the excess on the price.
Recently, prices have bounced back from the lower band of three year’s long channelized move (1560 –850) underpinned by strong volumes along with highest delivery percentage (78%) since June 2011, indicating accumulation at lower levels.
Thus we believe, the stock has undergone a base building process and set the stage to resolve higher from here on. Hence, it offers a favourable risk-reward set up over the medium term.(The author is Head Technical at ICICI Direct.com Research)
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.