By Dharmesh Shah ICICI Direct.com Research
The Nifty has taken a breather after the strong rally of nearly 8 percent in the last five weeks which pushed the weekly stochastic oscillator to the highly overbought reading of 91, thereby warranting a temporary consolidation.
We believe a round of consolidation from here on will make the market healthier by working off the short-term overbought conditions and thereby create a fresh buying opportunity.
We expect the breakout area of last three-month consolidation and 38.2% retracement of current up move placed around 10170 to act as strong support in the present scenario. Therefore, the current breather should be seen as an incremental buying opportunity.
We expect the index to conclude the temporary consolidation phase over the coming sessions and eventually resolve higher towards the target of 10600 in the month ahead as it is the measuring implication of the three-month consolidation breakout.
The overall price structure remains bullish as the index continues to form rising peaks and troughs in weekly/monthly time frame.
Price wise, the current up move from September 2017 lows (9687 to 10490 = 803 points) is larger in magnitude compared to last rising segment of July-August 2017, measuring 689 points.
The rally getting bigger highlights persistent demand at elevated levels and augurs well for the continuance of the up move going forward.
Here is a list of top three stocks which could give up to 23% return in 6 months:
Tata Elxsi: BUY| CMP – 884| Target Rs978| Stop Loss Rs839| Return 10%| Time Frame 1 month
The share price of Tata Elxsi has attracted strong demand at the major value area of 800 region as it was the confluence of the 52 week EMA and the lower band of the rising channel encompassing the up move since June 2017 till date.
The up move in the current week has seen the stock breakout from its five-week base formation above the value area of Rs800 thereby signalling the resumption of upward momentum and provides good entry opportunity to ride the next up move in the coming month.
Among oscillators, the weekly RSI has generated a bullish crossover above its nine-period average indicating strength in the price breakout and supports the continuance of the upward momentum going forward.
We expect the stock to test 978 in the coming month being the 138.2% extension of the previous up move from 792 to 888 as projected from the recent trough of | 829.
Oberoi Realty: BUY| CMP Rs488| Target Rs590| Stop Loss Rs432| Return 21%| Time Frame 6 months
The stock remains in a well-established uptrend and continues to inch northwards in a rising peaks and troughs manner on medium time frame charts.
Structurally, the rallies are becoming bigger and swifter underlying the robustness in the price structure along with strong momentum. At the same time, corrections are short-lived and shallow in nature which is the sign of the consistent appetite for the stock at elevated levels.
The stock has resumed upward momentum following a breather over the last couple of weeks which represented a Bullish Flag continuation pattern on the daily scale.
Breakout from bullish continuation pattern offers a fresh entry opportunity to ride prevalent uptrend in the stock. We expect the stock to continue its upward trend towards a medium-term target of 590 based on Bullish Flag pattern implication.
The Flag pole (first rally from support: 348-487=139 points) is projected from the current week’s low (452+139=592) to provide the target of 590 over medium term
Sadbhav Engineering: BUY CMP – 313 Target – 385 Stop Loss – 275 Upside – 23% Time Frame 6 months
The stock remains in a well-established uptrend and continues to inch northwards in a rising peaks and troughs manner in the weekly chart.
Structurally, the entire up move since February 2016 till date has occurred in a well-defined rising channel which highlights the robust price structure amid persistent demand to own the stock at elevated levels.
The stock has recently seen a sharp rebound from the support area of Rs265-275 being the confluence of the following technical parameters:
The lower band of the rising channel containing the entire price action since February 2016 as can be seen in the adjacent chart.
80% retracement of the preceding major up move from Rs238 to Rs350 placed at Rs270 levels.
The rising 200 weeks EMA, which has acted as a strong support is placed on Rs260 levels
We believe the corrective consolidation phase over the last five months has approached maturity. We expect the stock to resolve higher and test Rs385 levels in the medium term as it is the upper band of rising channel in place since February 2016.
Disclaimer: The author is Head Technical, AVP at ICICI Direct.com Research. The views and investment tips expressed by investment experts on Moneycontrol.com are their 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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