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Last Updated : Oct 06, 2017 11:35 AM IST | Source: Moneycontrol.com

Level of 9960 crucial for bulls; 5 stocks which could give up to 12% return in short-term

Asain Paints, CESC, Vedanta, Gail India and Tata Global Beverages could give up to 12% return in short-term.

 
 
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By Pritesh Mehta

IIFL Private Wealth

Snapping its four-session winning streak, Nifty50 yet again faced a hurdle near its 50-day MA of 9,944. It formed a bearish candle with a close near day’s low, failing to provide a positive follow-up to Wednesday’s bullish candle.

It retreated from the 50% retracement level (9,933) of the recent decline (10,179-9,688), thereby increasing the significance of the supply line placed near 9,930.

Close

The peak of the tall bar at 9,221, created on 27th Sep, is placed near three-digit gann number of 9930. Also, series of shaven tops are seen at 9920 and 9960, which implies that a move above 9920-9960 zone is essential for gaining further upside momentum.

The Nifty breadth turned mildly negative with 28 of Nifty50 constituents settling in red. After having made a peak of 9,921 with a large bearish candle (formed on 27th Sep), Nifty has failed to provide a close above 9,921 ever since.

On the flip side, any break below 9,850 would break the series of ascending highs and lows, visible on the recent price structure.

BankNifty continued to underperform, facing stiff resistance near 38.2% retracement of the recent decline. Multiple swings high near 24,230 followed by a peak of the large bearish candle (24,332) could act as short-term hurdle zone.

Here is a list of top 5 stocks which could give up to 12% return in short term:

CESC: BUY| Target Rs1090| Stop Loss Rs990| Return 9%

The phase of consolidation after a sharp decline suggests exhaustion of selling pressure. In last month’s trade, CESC had made a peak of Rs1,080 and went through a sharp correction, as it failed to clear the gann number of 1080.

However, it took support around the third line of defense as per the gann rule of 8 and began a process of consolidation.

This critical support resulted in an end of the recent selling pressure. Following a phase of base-building at the bottom for previous two weeks, the stock attempted a breakout above the rounding bottom pattern on the short-term charts.

Keeping in mind, the above-mentioned parameters, we recommend a buy on CESC above Rs1,020 with a stop loss of Rs990 for a target of Rs1,090.

GAIL: BUY| Target Rs480| Stop Loss Rs420| Return 12%

After being in a phase of consolidation at the top of its rally, it finally staged a breakout on the upside.

It is showing the trait of a stock which is in a strong uptrend since December 2016. Since last six weeks, the sideways consolidation at the top of its trend can be termed as bullish consolidation.

The outcome of such sideways movement are dealt positively during an uptrend. Moreover, it continues to trade above its 20-EMA on the weekly chart. Fresh breakout was seen in this week’s trade from the recent sideways activity.

Ratio chart of Energy index shows a rounding bottoming out process after a prolonged downtrend of 6 years. A move above 1.40 would confirm a breakout and outperformance of Energy stocks against Nifty.

Based on above parameters, we recommend investors to buy GAIL above Rs440 and a stop loss of Rs420 for a target of Rs480.

Vedanta: BUY| Target Rs346| Stop Loss Rs310| Return 9%

After making a high of Rs335 in the second week of September, the stock went through a phase of sharp decline. In the process, it touched a low of Rs297.

The same level coincides with the support of its 50-DMA. Also, it appeared near the gann number of 289, which was defended during the corrective phase. Moreover, the point of polarity support around Rs290 provided some respite for the counter.

Recovery in last few sessions saw the stock attempting a breakout from a downward sloping trendline drawn from the recent high. In this week’s trade, it sustained above the downward sloping trendline and is on the verge of surpassing the gann number of 325.

Based on above observations we re-iterate a buy on Vedanta above Rs322 with a stop loss of Rs310 and a target of Rs346.

Tata Global Beverage: BUY| Target Rs232| Stop Loss Rs202| Return 11%

We continue to remain positive on Tata Global, it has posted a rally of 2 percent in this week’s trade and we expect it to continue its recent momentum. It is an uptrending stock, which tends to go through a phase of consolidation & retracement after every upmove.

Recently it made a high of Rs220, thereafter it went through sharp correction and marked a low of Rs192 before quickly regaining control above the midpoint of current gann channel.

Gann analysis suggests that the stock is in a strong uptrend and it also confirmed a shift in the orbit on the upside. Since it is an uptrending stock, traders should always use any phase of consolidation or retracement to build longs.

Investors can buy Tata Global Beverages above Rs210 with a stop loss of Rs202 and a revised target of Rs232.

Asian Paints: BUY| Target Rs1240| Stop Loss Rs1150| Return 8%

A failed breakout attempt resulted in a sharp reversal as the stock collapsed from the peak of Rs1,262 to a low of Rs1,123. Point of polarity came to the rescue of the stock. Since July 2017, on multiple instances, Asian Paints had marked swing lows around Rs1,100.

Thereafter, it began a process of gradual recovery and in the process, it quickly regained control above the midpoint of current gann channel, which suggests an end to recent selling pressure.

A move above Rs1,175 would also result in a fresh breakout on short-term charts. Such set-ups after a prolonged period of correction tend to provide swift recovery.

Keeping in mind, the above mentioned technical observations, we recommend a buy on Asian Paints above Rs1,175 with a stop loss of Rs1,150 for a target of Rs1,240.

Disclaimer: The author is Head of Technical Research at IIFL Private Wealth. 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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First Published on Oct 6, 2017 11:35 am
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