Jay Purohit
The Nifty has seen a decent correction of more than 15 percent in the last two months and approaching its previous swing low of 9,951. Lately, 10,000 put writers have managed to defend their territory and as a result, the index has rebounded.
The sideways consolidation of the last seven sessions has also formed an Inverse Head & Shoulder pattern on the hourly chart. We witnessed a breakout from the pattern last month with decent volumes, which is a positive sign for the index.
The RSI oscillator on the daily chart is showing positive divergence as the index made lower low while RSI made a higher low. Historically, the positive divergence of RSI on the daily chart result in bottoming out in Nifty in most of the occurrences.
Looking at the above technical evidence, we are expecting a rally towards 10,600 – 10,700 in Nifty in coming months. Thus, long positions can be taken on declines towards 10,150 with a stop loss of 9,999 on a closing basis.
Till Diwali, we recommend buying Nifty around 10,140 for a target of 10,600 on the upside. One can hold that with trailing stop loss.
Here is a list of top six stocks which could give 20-30 percent return in the next 12 months:
Aurobindo Pharma: Buy| Target: Rs 930-985| Stop loss: Rs 715 on a closing basis
The Nifty Pharma index has given a breakout from the ‘Falling Channel’ of last three years and has outperformed the benchmark indices in recent past. Currently, the index is retesting the breakout level and has started rebounding.
Considering chart structure, we are expecting pharma counters to do well in the coming months. In Pharma space, Aurobindo Pharma is our preferred pick as the stock is showing tremendous strength with favourable risk-reward.
After the rally, the stock is moving in a sideways direction and has taken support around 50-EMA on the daily chart. The consolidation phase has resulted in the formation of a Bullish Pennant pattern on the daily chart.
The momentum oscillator along with moving averages are also supporting the bullish view on the counter. We advise buy the stock at current levels and on declines to Rs 760 for a target of Rs 930 and Rs 985. A stop-loss for trade should be placed at Rs 715 on a closing basis.
Sterlite Technologies: Buy| Target: Rs 430-455| Stop loss: Rs 340 on closing basis
The stock is moving in a strong uptrend. It was making higher highs and higher lows from the last five years on the monthly chart. However, we are witnessing a sideways movement from the start of the calendar year 2018.
Recently, the price took the support at 20-EMA on the monthly chart and has started moving higher. The consolidation phase of the last ten months has resulted in the formation of a triangle pattern on the weekly chart.
Currently, we are witnessing a breakout from the mentioned pattern with healthy volumes, which is a positive sign for the stock. The momentum oscillator RSI is moving in the bullish territory on daily, weekly and monthly chart, indicating strength in the counter.
Considering current chart structure, we advise traders to buy the stock at current levels and on dips to Rs 365 with a stop loss of Rs 340 on a closing basis. On the upside, we may see a rally towards Rs 430 – 455 in the coming weeks.
Bajaj Finance: Buy| Target: Rs 2,950-3,200| Stop loss: Rs 1,990 on closing basis
Bajaj Finance had a stellar rally in the last couple of years and is now moving in a strong uptrend by maintaining higher highs and higher lows on the weekly chart.
However, we witnessed a decent correction in the last two months and as a result, the stock tested the previous swing high (made in September 2017) and 20-EMA on the monthly chart.
The stock has started rebounding from the mentioned support zone with decent volumes, indicating buying interest from stronger hands at lower levels.
The RSI is rebounding from the oversold territory on the weekly chart and showing positive hidden divergence on the monthly chart, which is a positive sign for the stock.
Considering the above technical evidence, we are expecting a rally towards Rs 2,950 – 3,200 in the coming few months. Thus, any decline towards Rs 2,320 would be a buying opportunity for the stock. We advise traders to buy the stock with a stop loss of Rs 1,990 on a closing basis.
Bata India: Buy| Target: Rs 1,220| Stop loss: Rs 858 on closing basis
The last two years were too good for Bata India as it continued to make higher highs on the weekly chart and rallied by around 175 percent from its low of Rs 395.
Currently, the stock is taking the support of the rising trendline and 50-EMA on the weekly chart and has now started showing initial sign of reversal.
On the daily time scale, we are witnessing a formation of Double Bottom pattern around its strong support of 200-EMA, which indicates short-term base has been formed.
The RSI is taking support around its previous lows on the weekly chart and has turned northwards. Considering current chart structure, we are expecting a resumption of the previous uptrend in the counter.
Thus, we advise, accumulate the stock at current juncture and on declines to Rs 935 for the target of Rs 1,170 – 1,220 with a stop loss of Rs 858 on a closing basis.
ICICI Bank: Buy| Target: Rs 440| Stop loss: Rs 325 on a closing basis
ICICI Bank outperformed the broader market in the recent past and rallied to hit 52-weeks high. We witnessed a breakout from the Cup & Handle pattern on the daily chart in October.
The volumes were quite good at the time of the breakout, which further validates the breakout criteria. The short-term (50-EMA) and long-term (200 EMA) moving averages are placed positively on the daily chart. Also, the RSI and MACD on daily time scale indicate further strength in the counter.
Considering the above technical evidence, we are expecting a continuation in the ongoing momentum towards Rs 415 -440 in the coming quarter. Thus, we advise traders to buy the stock at current juncture and on declines to Rs 345 with a stop loss of Rs 325 on a closing basis.
Eicher Motors: Buy| Target 26,500-28,000| Stop loss: Rs 19,300 on closing basis
The stock has corrected very sharply in last four months and has reached in its strong support zone of Rs 19,385 – 21,320. If we meticulously observe the weekly chart, then we are witnessing a formation of Bullish Harmonic Pattern called Bullish Bat whose Potential Reversal Zone (PRZ) is placed at Rs 20,100 – 20,950.
The stock has started rebounding from the mentioned PRZ. The RSI on both daily and the weekly chart is rebounding from oversold territory and thus indicates a possibility of a bounce in the counter. Considering the bullish harmonic pattern around the support level, we are anticipating a reversal in the counter.
Thus, we advise traders to buy the stock at current juncture and on declines to Rs 21,000 with a stop loss of Rs 19,300 on a closing basis. On the upside, we may see Rs 26,500 – 28,000 level in coming months.
The author is a Technical & Derivatives Analyst at Centrum Broking Limited.
Disclaimer: The views and investment tips expressed by investment experts 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.
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