On the upside, a rally above 10,860 levels can see the index moving rally towards 10,929 levels which is its May high.
Domestic equity markets got off to a negative start to F&O expiry week, amid trade war concerns. The Nifty lost 0.6 percent to close at 10,753 on Monday.
The market breadth was in favour of declines with two share declining for every one gaining. After Friday’s rally, the market failed to show follow through action on the upside.
The index has been facing resistance at the falling resistance trend line connecting the highs of 11,172 and 10,929 levels. It faces resistance at 10,835-10,860 levels and needs to clear this hurdle which will confirm strength on the upside. On the downside, 10,700 levels is now critical support level from where buying emerged last week.
The rising support trend line connecting the lows of 9,952 and 10,418 levels comes around 10,700 levels. The triangle pattern formation emerges with the market at a critical juncture from where a break out on either side will provide direction.
A break below 10,700 levels will see resumption of the downtrend and the Nifty might retest 10,550 levels. On the upside, a rally above 10,860 levels can see the index moving rally towards 10,929 levels which is its May high.
In Nifty options, 10,800, 10,700 and 10,600 puts witnessed large amount of unwinding, while 10,800, 10,900 and 11,000 calls saw a significant amount of writing activity, suggesting upside is likely to be capped and that lowers levels may be tested.
Here is a list of top 5 stocks that could return 7-11 percent in the next 1 month:
Hindustan Unilever Limited: Buy| CMP: Rs 1,615| Stop loss: Rs 1,580| Target: Rs 1,750| Return 8%
The stock is in a long-term uptrend forming higher tops and higher bottoms on the daily and weekly charts. After the recent run-up move in the price, the stock has been consolidating its gains at all-time high levels between Rs 1,625 and Rs 1,550 odd levels for the last one month.
The 21-day exponential moving average (EMA) has been providing support on dips and the stock has been moving higher. Current bounce back has also been from the average.
The Relative strength index or the RSI has given a positive crossover with its average on the daily chart. Thus, the stock can be bought at current levels and on dips to Rs 1,605 with a stop loss below Rs 1,575 for a target of Rs 1,750 levels.
RBL Bank Limited: Buy| CMP: Rs 559| Stop loss: Rs 535| Target: Rs 620| Return 11%
The stock has been trading sideways to negative between Rs 600 to Rs 450 odd levels for more than a year now. It has formed a bullish inverted head and shoulders pattern on the weekly chart and witnessed a breakout on strong momentum and high volumes couple of weeks back.
After hitting a 52-week high of Rs 570, the price has corrected on below-average volumes to test the breakout level and then bounced back. The Relative strength index has given positive crossover with its average.
Thus, the stock can be bought at current levels and on dips to Rs 552 with a stop loss below Rs 535 for a target of Rs 620 levels.
Lupin Limited: Buy| CMP: Rs 913| Stop loss: Rs 880| Target: Rs 1,000| Return 9.5%
The stock has formed a bullish falling wedge pattern on the weekly chart. At the start of the month, the stock witnessed a breakout from the pattern on strong momentum and high volumes to touch a high of Rs 925.
Since then the price has been trading in a narrow range on below-average volumes consolidating its gains. It has formed a bullish pole and flag continuation pattern on the daily chart which is typically expected to give a breakout on the upside.
The stochastic oscillator has given a positive crossover with average suggesting uptrend is likely to resume. Thus, the stock can be bought at current levels and on dips to Rs 905 with a stop loss below Rs 880 and a target of Rs 1,000 levels.
Bajaj Finserv Limited: Buy| CMP: Rs 6,165| Stop loss: Rs 6,000| Target: Rs 6,600| Return 7%
The stock has seen consolidating in a range of Rs 5,800 and Rs 4,800 odd levels over the last nine months period. The price formed rounding bottom pattern and witnessed in the month of May on strong momentum backed by high volumes.
Since the last one-month, the stock has been consolidating above its breakout levels and seen a breakout from it. The ADX line indicator of trend strength on the weekly chart has moved above neutral level of 20 indicating uptrend is likely to sustain.
Thus, the stock can be bought at current levels and on dips to Rs 6,100 with a stop loss below Rs 6,000 for a target of Rs 6,600 levels.
Motherson Sumi Systems Limited: Sell| CMP: Rs 288| Stop loss: Rs 298| Target: Rs 260| Return 9.7%
The stock has formed a bearish head and shoulders pattern on the weekly chart over the last one-year period. In Monday’s session, the price has broken below the neckline of the pattern.
It has formed a long bearish candlestick and accompanied by high volumes confirming the breakout. Also, on the daily chart, the price has given a breakout from Bollinger band with the expansion of band and closed outside lower band suggesting the start of a fresh trend in the direction of the breakout.
The price has been trading below the long-term as well as short moving averages. MACD line has given negative crossover with its average below neutral level of zero on the daily chart.
Thus, the stock can be sold at current levels and on rise to Rs 291 with a stop loss above Rs 290 for a target of Rs 260 levels.Disclaimer: The author is Head Technical and Derivatives, Sanctum Wealth Management. 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.