By Dharmesh Shah ICICI Direct.com Research
The Nifty recouped most of the previous session losses and also filled the bearish gap area highlighting the lack of follow through beyond Tuesday’s decline.
The index had taken a breather after forming a record eleven consecutive higher lows during the current up move which pushed the short term momentum oscillators into the highly overbought territory.
Going forward, we expect the Nifty to head towards the earmarked target of 9970 regions as it is the measuring implication of the one-month consolidation range (9710 to 9450) which also coincides with the upper boundary of rising channel encompassing the entire up move since February 2017 placed around 9970 regions.
We expect stock specific action to continue going forward as we have entered into the quarterly earning seasons.
The immediate support base for the index has shifted to 9700 region as it is the confluence of recent breakout area and upper band of June 2017 consolidation placed at 9700.
The 9700 level on the Nifty is also 50 percent retracement of the current up move and the price wise equality with preceding falling segments measuring around 200 points from the recent high of 9,928 also projects support in the vicinity of 9700 region.
Top 4 stocks which can give up to 21 percent upside in the next 6 months:
ABB: BUY| CMP Rs 1455| Target Rs 1720| Stop Loss Rs 1320| Upside 18 percent| Time Frame 6 months
The stock had registered a strong volume led a breakout from its major two-year consolidation phase of above Rs1430 in May 2017. After the strong breakout rally in the first five months of CY17, the stock entered a sideways consolidation mode and oscillated between the broad range of Rs1620 and Rs1400 in the last two months.
The consolidation over the last nine weeks occurred mostly above the breakout level of Rs 1430 highlighting the change of polarity principle as per which a significant resistance once taken out reverses its role and acts as a support for future price movement.
We believe the current consolidation above the previous breakout area has laid the platform for the next up move.
The sharp rebound from the January 2017 low of Rs 1029 has seen the stock completely retraced its preceding nine months fall (Rs 1434 to Rs 1029) in less than 50 percent of the time (four months), thus confirming a faster retracement.
Faster retracement of the last major falling segment highlights the strong demand emerging at the major value area and confirms the bullish turnaround in price structure
We expect the stock to continue with its uptrend post the recent consolidation and head towards Rs 1720 region over the medium term as it is the 138.2 percent extension of the previous decline (Rs 1620 -1376).
Bata India: BUY| CMP Rs 570| Target Rs 635| Stop Loss Rs 537| Upside 11 percent| Time Frame 3 months
The sharp up move from the December 2016 low of Rs400 saw the stock register a resolute breakout above the long term trendline resistance joining the major highs since January 2015.
After the major breakout rally, the share price moved into a sideways consolidation phase and marked time between the broad range of Rs 590 to Rs 520 levels over the last two months.
We believe the two months consolidation above the major trendline breakout area has laid the foundation for the next major up move going forward and the stock provides a good investment opportunity.
We expect the stock to resume its uptrend and head towards Rs 635 levels being the 161.8 percent external retracement of the previous down move (Rs 593 to Rs 516)
Rallis: BUY| CMP Rs 245| Target Rs 295| Stop Loss Rs 215| Upside 20 percent| Time Frame 6 months
The stock entered a secondary corrective phase after hitting a high of Rs289 in March 2015. The entire corrective price action over the past two years took the pictorial form of a well defined Cup & Handle pattern which is a bullish continuation price pattern having a positive implication on the price front upon resolution above the neckline of the pattern.
The stock registered a strong volume led a breakout from 24-month bullish cup & handle pattern above Rs230 in early February 2017.
After the strong breakout rally from Rs 188 to Rs 254 in just two months, the stock has entered into sideways consolidation mode and oscillated between the broad range of Rs265 and Rs235 over the last four months.
This entire consolidation over the last four months has occurred above the breakout level of Rs230 highlighting the change of polarity principle as per which a significant resistance once taken out reverses its role and acts as a support for future price movement.
We believe the stock is well poised to resume its up move after an elongated consolidation and provides good entry opportunity to ride the next up move
We expect the share price to head towards Rs 295 over the medium term being the price parity with the previous up move from Rs 206 to Rs 266 (60 points) added to the recent trough of Rs235 project upside towards Rs 295 levels in the medium term
Sundaram Finance: BUY| CMP Rs 1649| Target Rs 1,990| Stop Loss Rs 1490| Upside 21 percent| Time Frame 6 months
The stock entered a sideways consolidation mode after hitting a 52 week high of Rs 1740 in mid-April 2017 and, thereafter, oscillated in a price band of Rs 1740 to Rs 1470 over the last three months.
Pictorially, this sideways consolidation has taken the shape of a bullish Flag pattern as highlighted in the adjoining chart. A flag formation is a bullish continuance pattern representing a temporary pause in an uptrend as bulls take a breather after strong advance to gather steam before the continuation of the preceding up trend.
The resolute breakout from the bullish Flag pattern in current weeks trade signals conclusion of the secondary corrective phase and resumption of the upward momentum thus provides fresh entry opportunity to ride the next up move in the stock.
Time wise, the sideways consolidation representing the Flag pattern has already consumed 15 weeks against the preceding 14-week rally from Rs1102 to 1740, which was retraced by just 38.2 percent. Limited price wise correction and extended time wise consolidation highlights the robust price structure and augurs well for continuance of the uptrend
We believe the stock has concluded a healthy corrective consolidation and is set to embark upon its next major up move towards Rs 1990 over the medium term as it is the 161.8 percent external retracement of the entire corrective consolidation since the year 2015 from Rs 1640 to Rs 1102 placed at Rs 1990 levels
Disclaimer: The author is Head Technical Designation - 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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