The short term trend is likely to reverse only if the Nifty breaches the 11,340 on a closing basis, says Hadrien Mendonca of IIFL
After enjoying a five-week solid upswing, the Nifty is finally showing early signs of fatigue. Indices have entered into a consolidation phase at the current juncture on account of multiple challenges.
The rupee failed to halt its weakening trend as the currency continued to free fall against the dollar on Thursday. The rupee breached the psychological Rs 70 per dollar mark in Thursday's trading session and hit a fresh low of Rs 70.39/$.
Global weakness continues to dent sentiment on the street. However, the overall scenario for the Indian equity market has not changed as yet as the higher peak and higher trough structure continues to remain intact.
The short term trend is likely to reverse only if the Nifty breaches the 11,340 on a closing basis. On the upside, a break above the resistance of 11,500 would trigger a fresh breakout for the Nifty.
The Nifty Pharma index continues to show immense strength after the breakout that it witnessed two weeks earlier. The index has managed to form a bullish engulfing pattern, which further strengthens our conviction on the sector.
The Nifty Midcap 100 index remains stuck in a narrow trading band and is forming a Flag pattern. It is also sustaining above its long-term 200-Double Exponential Moving Average, which is a positive development. A break above 19,330 level would trigger a Flag pattern breakout.
Following is a list of stocks that could deliver up to 7-10 percent returns
Sun Pharmaceutical: Buy| Target: Rs 667| Stop Loss: Rs 598| Returns 7.4%
The stock has been showing immense strength in the past three months and is finally breaking out from a Double Bottom pattern on the weekly chart.
The price outburst has been accompanied with a smart uptick in traded volumes. Apart from this, it has also broken out from a Flag pattern on the weekly chart as well which further accentuates our bullish stance on the stock.
DLF: Buy| Target: Rs 228| Stop Loss: Rs 197| Returns 10%
The stock has seen a solid momentum for the past four weeks and has finally broken out from an inverse head and shoulder pattern on the daily chart.
Rising volumes and positive crossovers on the other momentum oscillators indicate that the current momentum is likely to get carried forward. In addition, DLF has also surpassed its long-term 200-DEMA and closed above the same.
GAIL: Buy| Target: Rs 425| Stop Loss: Rs 377| Returns 8.1%
The stock been creating a fresh base for the past seven months and is finally indicating that it is all set to break out from a Rounding Bottom pattern on the weekly charts.
In addition, it is also in the process of forming a bullish engulfing candlestick pattern on the weekly chart. We expect, GAIL to move higher towards its potential target of Rs 425 in the medium term.Disclaimer: The author is a Senior Technical Analyst, IIFL. The views and investment tips expressed by investment expert on Moneycontrol are his own and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.