The Nifty closed above its crucial psychological level of 9,650 on Friday but Call writing at strike prices 9,700 and 9,800 is likely to act as stiff resistance levels for the index. Traders are advised to book profits as the index approaches 9,700 this week.
The Nifty consolidated in a narrow range throughout this past week as the index closed just 0.6 percent higher for the week ended June 2. The earning season is almost over and the next big trigger will come in the form of Reserve Bank of India’s policy meeting this week on Wednesday.
RBI has held its benchmark repo rate at a six-year low of 6.25 percent on April 6, 2017, as widely expected, and raised its reverse repo rate by 0.25 percent to 6 percent, saying there are upside risks to the inflation outlook amid an uncertain global economic environment.
“It will be a big surprise if RBI cuts rates now. Even as a scenario to cut rate is emerging, RBI will take some more time as they are also concerned about inflation and how much further the note-ban impact will continue,” Vijay Singhania, Founder-Director, Trade Smart Online told Moneycontrol.
On the technical front, most analysts expect the phase of consolidation to continue this week as well. The big make or break event will be US Federal Reserve policy meeting. But, in all likelihood, the index is likely to make a dash towards 9,700, but the upside is seen limited.
“We believe that the upside in the near term is now limited. In last 4 – 5 months, we have not used a word ‘cautious’ even on a single occasion,” Sameet Chavan, Chief Analyst Technical, and Derivatives, Angel Broking Pvt Ltd.
“We would like to reiterate few key observations, which are 1) the 127% Reciprocal retracement of the recent ‘Bullish Flag’ pattern on daily chart is at 9,642, 2) the ‘Golden Ratio’ (161% Reciprocal retracement) of the corrective move from 8,968.70 to 7,893.80 is at 9624 and most importantly, and 3) The ‘Multi-year Price Extension’ (127% of 2252.75 to 6,338.50 from 4,531.15) is at 9,720,” he said.
Chavan further added that all these key ratios are converging in a band of 100 points i.e. 9,620 – 9,720 and hence, looking at this evidence, we would advise traders to lighten up their positions in the mentioned zone.
Traders are advised to keep focusing on individual stocks which are likely to offer better trading opportunities. On the other hand, 9,581 – 9,520 would act as a strong support zone.
Here is a list of top 5 stocks which can give up to 14 percent return in the short term:
Karur Vysya Bank: BUY| Target Rs 133| Stop Loss Rs115| Return 10%| Time Horizon 5 sessions
The stock is in an uptrend since last few months. During last few weeks, prices have consolidated in a narrow range. The consolidation phase just seems to be a time correction within an uptrend. The prices are indicating breakout from the consolidation and thus, may resume the uptrend.
The ‘RSI’ oscillator too has given a positive crossover from its support. Considering the above technical setup, we are expecting an up move in the stock in near term. Traders recommend buying this stock for a target of Rs.133 by keeping a strict stop loss at Rs.115.
NMDC: BUY| Target Rs129| Stop Loss Rs109| Return 14%| Time Horizon 14-21 sessions
After a decent rally from Rs64.50 to Rs147.85, the stock has started moving in corrective phase. The correction of last three months should halt at current juncture as the stock is retesting its ‘Falling Trendline’ breakout levels on the monthly chart.
The mentioned breakout levels coincide with the 38.20% retracement level (Rs116) of the mentioned up move and ’20 EMA’ on the monthly chart, which is placed around Rs113.75. Traders are advised to buy with a target of Rs.129 in coming 14 - 21 sessions. The stop loss should be fixed at Rs.109.
GSPL: BUY| Target Rs188| Stop Loss Rs168| Return 5%| Time Horizon 2-3 weeks
Due to recent correction, the stock has retested its ‘Trendline’ breakout levels, which coincides with the 61.80% retracement levels of the recent up move. The up move was supported by huge volumes; while the correction was on low volumes.
On Thursday, we witnessed a breakout from the ‘Triangle’ pattern on the hourly chart. Also, the ‘RSI- Smoothened’ Oscillator on the daily chart is giving a positive crossover with its average. One should look to buy on minor dips for a near-term target of Rs.188 in coming 2 – 3 weeks. stop loss can be placed at Rs.168.
Brokerage Firm: SMC Capital (Time Horizon 1-2 months)
Apollo Tyres: BUY| Target Rs 260| Stop Loss 233| Return 5%
The stock closed at `247.15 on 02nd June 2017. It made a 52-week low at 139.35 on 24th June 2016 and a 52-week high of 254.25 on 03rd May 2017. The 200 days Exponential Moving Average (EMA) of the stock on the daily chart is currently at 202.13.
After a marginal fall from higher levels, it finally took support near 215 levels and succeeded to recover its lost value which indicates its potential to remain upwards.
Therefore, one can buy in the range of Rs240-245 levels for the upside target of Rs255-260 levels with a stop loss below Rs233.
Emami Ltd: BUY| 1190| Stop Loss Rs 1080| Return 4%
The stock closed at 1135.00 on 02nd June 2017. It made a 52-week low at 935.40 on 23rd December 2016 and a 52-week high of 1260 on 04th November 2017. The 200 days Exponential Moving Average (EMA) of the stock on the daily chart is currently at 1069.80.
After a strong consolidation, it went up last week with a rise in volumes and prices which shows its strength. Moreover, oscillators are also supporting its northward movement. Therefore, one can buy in the range of Rs1115-1125 levels for the upside target of Rs1180-1190 levels with a stop loss placed below Rs1080.Disclaimer
: 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.