The Nifty hit a new high as it managed to close above 13,500 for the first time the previous week. The benchmark index formed a flat bottom green Heikin-Ashi candle on the weekly time frame and a close above the previous week’s high indicates continued bullish bias.
India VIX continues to trade below 10 and 20-DMA and that too supports bullish action. The Nifty, however, is trading above the ascending trend line plotted by connecting 11,625 and 12,430 points, a small correction, taking the clue from divergence and overbought oscillators, cannot be ruled out.
Also, on the wave count basis, the Nifty has achieved the impulse target but chances of double extension of the impulse wave will unfold if the index does not trade below the lowest low of the last three trading sessions that is at around 13,400.
RSI and Stochastic are trading with negative divergence on a daily timeframe and any decisive move below the line of parity standing around 13,400 will confirm a short-term price reversal that can push prices lower towards 20-DMA standing at around 13,100.
Bank Nifty
The Bank Nifty continued its overwhelming rally in the previous week to close above all short-term moving averages and important psychological levels of 30,000-mark as well. Immediate support is standing at around 30,200 and any daily close below the level will indicate an early sign of a correction.
Here are the top 3 stocks that can return up to 15 percent:
Abbott India Limited: Buy Around Rs 16,000 | Target: Rs 18,400 | Stop Loss: Rs 15,000 | Upside 15%
The stock appears to have registered a falling channel breakout with a close above its critical hurdle of Rs 16,000 on December 11 on massive volumes. Considering the bigger price damage this counter has suffered in the past, much higher targets can’t be ruled out. Indicators and oscillators are looking conducive for price patterns. Hence, for the time being, positional traders should buy around Rs 16,000 and can look for an initial target of Rs 184,00 by placing a stop loss at Rs 15,000.
Federal Bank Limited: Buy around Rs 64 | Target: Rs 73 | Stop Loss: Rs 58 | Upside 14%
The stock has maintained a strong base near Rs 58-60 zone and current sustainability above all significant averages has improved the bias with a positive candle forming on the daily chart. The RSI also has indicated a trend reversal signal to "buy". With the chart looking attractive, we suggest buying this stock around Rs 64 for a target of Rs 73, while keeping the stop loss of Rs 58.
ITC Limited: Buy around: Rs 210 | Target: Rs 235 | Stop Loss: Rs 195 | Upside 12%
The counter appears to have registered a clear breakout with a close above its multi-week consolidation zone on the weekly line chart. A strong bull candle with decent volume is showing more upside moves in the coming sessions.
If the stock closes above Rs 220, it should eventually head higher towards its initial range breakout target of Rs 230 and Rs 240. For the time being, positional traders are advised to buy on a pullback around Rs 210 into this counter for a target of Rs 230 and Rs 240, with a stop below Rs 195 on a closing basis.
The author is Head of Technical Research at Narnolia Financial Advisors Ltd.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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