Nandish Shah HDFC Securities
The Nifty gained 75 points on Monday to close at 11,085, its highest close since January 29. We are only 85 points away from the all-time closing high of 11,171 levels. By closing at 11,085 levels, the index has broken out on the daily chart from a double top resistance at 11,078 levels
The trend for the benchmark index is bullish as it is trading above its 20, 50, 100 and 200-day daily moving average. The momentum indicators and oscillators are also showing strength for both indices.
The next meaningful target for the Nifty stands at 11,395, a 100 percent extension of the swing seen from 9,952 (bottom of March 23) to 10,929 (top of May 15) and from 10,929 to 10,417 (bottom of May 23). As far as support is concerned, 10,900 is the level to watch out for on the Nifty.
The Nifty Midcap and Smallcap indices outperformed the Nifty by closing with a gain of 1.1 percent and 0.8 percent, respectively. The Nifty Smallcap index has witnessed a fall of 28 percent in the correction which started from January. Last week, it touched a 14- month low.
The difference between the largecap and smallcap index has widened further last week. Though the positional set-up for the midcap and smallcap indices is still bearish with lower tops and bottoms, both indices seem to have reached an oversold zone, which could trigger a relief or pullback rally in coming days.
In derivatives, we have seen long positions being built in Nifty futures on Monday as well as last week. Foreign institutional investors also created fresh longs in index futures the July series, a first after the April series.
The Nifty is likely to find immediate resistance around 11,200-11,250 levels, where calls have been written. Any close above 11,250 levels would result in further short covering which might push the Nifty to 11,400 levels
We advice investors to accumulate long positions on the Nifty with a stop loss of 10,900 and targets of 11,250, and 11,400.
Here is a list of 3 stocks that could return 8-10% in the next 1-2 months:
Sterlite Technologies: Buy| LTP: Rs 343| Target: Rs 370 | Stop-Loss: Rs 325 | Return 8%
On last Friday, Sterlite Technologies broke out from the downward sloping channel on the weekly chart by closing above the Rs 325 levels. Volumes have gone up along with the price rise in the last two weeks.
The stock price has been taking support at its 55-week exponential moving average. The stock price is placed above all important moving average parameters, indicating a bullish trend. Oscillators like RSI and ADX are indicating strength on the short-term charts. Therefore, we recommend buying Sterlite Technologies for the upside target of Rs 370 and keeping a stop loss placed below Rs 325.
ICICI Bank: Buy| LTP: Rs 276| Target: Rs 300 | Stop-Loss: Rs 260 | Return 9%
After forming multiple bottoms around Rs 255 odd levels during the last few months, the stock price reversed northward on Monday to close above its 20-day simple moving average for the first time since June 25th.
It has also given a bullish breakout on the daily chart with higher volumes by closing above the Rs 273 levels. The stock price has also formed a bullish Hammer pattern on the weekly chart.
The momentum indicators’ and Oscillators like RSI and MACD are showing strength in the stock for the short to medium-term. Therefore, we recommend buying ICICI Bank for the upside target of Rs 300, with a stop loss placed below Rs 260.
Suven Life Sciences: Buy| LTP: Rs 231| Target: Rs 255 | Stop-Loss: Rs 218 | Return 10%
Suven has given a breakout on the daily chart on Monday with the rise in volumes to close at a one-month high. The stock price also broke out from the downward sloping trendline, adjoining the highs of 18-June-2018 and 10-July-2018.
The stock price is trading above its 5, 20 and 200-DMA indicating a bullish trend for the short to medium-term.
The momentum indicators and Oscillators like RSI and MACD are showing strength in the stock. Therefore, we recommend buying Suven for the upside target of Rs 255, and a stop loss placed below Rs 218
Disclaimer: The author is a Technical & Derivatives Analyst at HDFC Securities. The views and investment tips expressed by investment expert on moneycontrol.com are his 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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