The Nifty has rallied 13 percent in 2021 to touch a record high of 15,915 on June 28 but has since been consolidating even though the larger trend is bullish.
Technical experts warn that the upside in the index from here may not be linear but stock-specific opportunities will keep coming up.
“If we look at the current price action, we can conclude that although the index is inching higher, it’s dragging itself,” Mehul Kothari, AVP –Technical Research at AnandRathi said.
“This indicates that the bulls are losing steam. If we look at the technical target then the consolidation breakout above 15400 has the potential to bring the index near 16,200–16,400. However, that could be the buying climax for the markets because at this point in time there are some red flags which we are observing,” he said.
If the Nifty slides further, 15,400 would be the decisive support and a breach of it would bring the index down to 15,000, which could again be a buying opportunity.
Based on technicals, we have collated a list of stocks that are looking attractive for the next three-six months. Returns are calculated based on the closing price of July 1.
Expert: Rajesh Palviya, VP–Technical Derivative & Research, Axis Securities
Dr Reddy's Laboratories: Buy| LTP: Rs 5,559| Target: Rs 6,000-6,200| Stop Loss: Rs 4,900| Upside 11%
The stock registered a new high at Rs 5,577 on July 1, signalling a strong momentum at higher levels. The stock continues to surge higher forming a series of higher tops and higher bottoms, indicating sustained strength across all time frames.
On the quarterly chart, the price confirmed the “rounding pattern” breakout at 4,450 levels on a closing basis. With the recent swing low (4,135) of March 2021, the stock has rebounded from its earlier breakout, which points to strong buying at lower levels.
The monthly and quarterly strength indicator RSI is in a bullish mode along with a positive crossover that reconfirms our bullish thesis. Buying and accumulation Range for D. Reddy’s is Rs 5,450-5,200.
The stock can be bought for a target of Rs 6,000-6,200, along with a stop loss of Rs 4,900 for long positions. The time period is three-six months.
SBI: Buy| LTP: Rs 420| Target: Rs 480-500| Stop Loss: Rs 350| Upside 19%
Since December 2010, the stock has been consolidating in a range of 350-150, indicating strong accumulation. This price consolidation breakout is confirmed monthly as well as on quarterly timeframes on a closing basis.
On the monthly chart, the stock has also confirmed a “V” pattern breakout at 350 levels, signalling strength ahead. The stock is well placed above its 50, 100, and 200 day-simple moving averages. These averages are also inching up along with prices.
This reconfirms a strong uptrend across all time frames. The monthly and quarterly strength indicator RSI is in positive terrain, pointing to sustained strength at higher levels.
The buying and accumulation range for SBI is Rs 410-390. Traders can go long for a target of Rs 480-500 with a stop loss placed below Rs 350. The ideal time frame is three-six months.
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Expert: Dharmesh Shah, Head–Technical, ICICI Direct
TCS: Buy| LTP: Rs 3,341| Target: Rs 3,750| Stop Loss: Rs 3,110| Upside 12%
TCS has remained at forefront of IT sector outperformance in the current market. The share price is resolving out of a five-month consolidation pattern, indicating resumption of structural uptrend and offers fresh entry opportunity
The stock has held its rising 10-week EMA on multiple occasions over the past 15 months, which signals elevated buying demand.
Over the past five months, the stock formed a strong base above this key moving average (currently at 3,100), thereby maintaining its rhythm.
The weekly MACD, which gauges medium-term momentum, has generated fresh crossover above its nine-period average, which, too, points to a growing appetite to own the stock.
We expect the stock price to head towards Rs 3,750, which is the implication of the past five-month consolidation breakout. The key support is placed at 3,110 which is June 2021 low and 61.8 percent retracement.
Tata Motors: Buy| LTP: Rs 344| Target: Rs 405| Stop Loss: Rs 324| Upside 17%
The auto index is seen breaking above the consolidation of the last five months, signalling resumption of the up move. Among large-cap auto stocks, we remain constructive on Tata Motors as it formed a higher base above the major support area of Rs 280 and is seen resuming its primary uptrend, thus offering a fresh entry opportunity
The stock recently registered a breakout above the last four month’s consolidation range (342-279), thus opening upside towards Rs 405 as it is the measuring implication of the recent range breakout (342-279=63 points) added to the breakout area of Rs 342 signalling upside towards Rs 405.
The stock has witnessed a shallow retracement, while a higher base above the 20-week EMA and the 38.2 percent retracement of the previous up move (157-342) signals a robust price structure and higher base formation.
The weekly 14-period RSI has recently generated a buy signal.
Expert: Pritesh Mehta, Lead Technical Analyst - Institutional Equities, Yes Securities
Tata Steel Ltd: Buy| LTP: Rs 1163| Target: Rs 1750| Stop Loss: Rs 1020| Upside 50%
Metals, so far, have had an incredible year. The Nifty metals index has rallied more than 60 percent in the first six months of 2021. It went through a sideways corrective zone from May to June.
However, it defended the confluence of support at lower levels and recovered in the last few weeks. The ratio of Nifty metals vs the Nifty has bounced off support of its 50-DMA.
Following a phase of correction in the international commodity prices and a brief rally in the dollar index above the 92-mark, stability has emerged across the globe.
The dollar index is expected to retrace lower. Following recent corrective action back home, we expect metals to take over leadership yet again.
Within the space, Tata Steel is outperforming Nifty and metal indices both. On P&F chart (0.5%*3), Tata Steel has staged a bullish turtle breakout, rising double top buy and bullish continuation post bullish anchor column, suggesting a move towards Rs1,750 in next 6 months. Support for the same is placed at Rs 1,020.
ICICI Bank: Buy| LTP: Rs 630| Target: Rs 780| Stop Loss: Rs 570| Upside 23%
ICICI Bank has been consolidating at the top after breaking out in February 2021. Support for the stock is also moving higher. We expect this consolidation to resolve on the upside, as ICICI Bank continues to outperform the Bank Nifty.
On P&F chart, ICICI Bank has staged a breakout above down sloping 45-degree TL and has been gradually moving higher with bullish continuation patterns. The upside move towards Rs780 is plausible in the next six months with support placed at around Rs 570.
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