Moneycontrol Contributor
September 25, 2019 / 08:31 IST
Vinay Rajani
Nifty rose almost 1,000 points in last two sessions. The index soared more than 8 percent while Bank Nifty surged 14 percent from in last two sessions. This is the highest two days gain in Nifty and Bank Nifty after May 18, 2018. After rising 5.32 percent on September 20, Nifty opened with a gap of 268 points in next session of September 23. This gap is between 11,382 and 11,471. This gap would act as a strong support zone in case of correction.
Nifty has retraced more than 61.8 percent of the entire down move from 12,103 (all time high registered on June 3) to 10,637 (August 23, Bottom). The Next retracement of 76.4 percent gives resistance at 11,757 in Nifty. Out of 50 Nifty stocks, nine stocks have hit fresh 52-week highs. Nifty and Bank Nifty are just 4 percent away from their all time highs.
In this scenario, the biggest question comes to the mind of traders and investors is that whether to buy after sharp rise in short span of time. Though Nifty Smallcap Index has risen by 14 percent from August bottom, it is still down by 40 percent from its all time highs seen in January 2018. Midcap Index is placed 23 percent away from its January 2018 highs.
When a major trend changes, the first round of buying comes in largecaps. Once the trend sustains, midcaps and smallcaps catch the trend. However, midcaps and smallcaps do have the potential to give healthy returns in short span of time.
From the derivative front, Call writing has been happening in the strike of 11,700-11,800 for the September series. In the short term, Nifty could see profit booking in the zone of 11,700-11,800. The highest OI is placed at 11500 Nifty Put for October series. So, on the downside 11,500 would act as a strong support. Nifty PCR is currently placed at 1.47, which is still at a fair distance from the overbought zone of 1.8. So even though Nifty has seen gigantic up move recently, it can still extend the rally.
We believe that Nifty has entered a bullish territory for the medium to long term. However, running correction in after recent sharp up move cannot be ruled out. The support zone of 11,400-11,500 should be utilized to create fresh long positions in Nifty. Above 11,800, Nifty could extend the gains towards 12000. Stock a specific bullish move is expected to be there in the markets.
Here are the top three stocks which can give 9-12 percent return
Godrej Properties: Buy | LTP: Rs 1,009: | Target: Rs 1,110 | Stop loss: Rs 950 | Return: 10 percent The Nifty reality index has given breakout from bullish “Inverse head and shoulder” pattern on the daily charts. Godrej Properties has given breakout from symmetrical triangle pattern on the daily charts. The stock is placed at higher tops and higher bottom on the daily charts. The stock is placed above all important moving average parameters.
Considering the technical evidences discussed above, we recommend buying the stock at CMP for the target of Rs 1110 keeping stop loss at Rs 950 on closing basis.
Deepak Nitrite: Buy | LTP: Rs 300 | Target: Rs 335 | Stop loss: Rs 287 | Return: 11 percent The primary trend of the stock has been bullish on weekly and monthly charts. The stock price has surpassed the super trend indicator resistance and closed above that. Volumes have been rising along with the price rise for last three sessions. The stock has reversed north after taking support on its 200-DMA. Indicators and Oscillators have turned bullish on daily and weekly charts
Considering the technical evidences, we recommend buying the stock at CMP for the target of Rs 335 keeping stop loss at Rs 287 on closing basis.
Finolex Cables: Buy | LTP: Rs 412 | Target: Rs 462 | Stop loss: Rs 386 | Return: 12 percent The stock price has broken out from last 10 week’s consolidation. It surpassed the resistances of its 20 and 50 DMA. The stock price has reversed north from long term support of multiple historical bottoms. The triple bottom formation is witnessed on weekly charts.
Considering the technical evidence, we recommend buying the stock at CMP, for the target of Rs 462, keeping a stop loss at Rs 386 on closing basis.
The author is Technical and Derivative Analyst at HDFC Securities
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