For market to move higher recent swing of 9889 needs to be taken out for move towards 10550 levels.
It was a volatile session of trade for the market on May 6. After the initial weakness market rallied into the green but was unable to sustain at higher levels. The Nifty finally settled at 9,271 up 0.71% for the day. Broader market indices BSE Midcap and Smallcap also saw a gain of 0.78% and 0.49% respectively for the day. The market breadth on NSE was negative with advance-decline ratio of 4:5.
On the daily chart, the index has formed a bearish rising wedge pattern. It has retraced 50% of the decline from 12,430 to 7,511, thus, suggesting pullback rally is over. Though on last Thursday, the index witnessed breakout on upside, it has failed to sustain it, and Monday’s gap down opening has formed bearish island reversal pattern. Nifty has given breakdown from wedge pattern and trading below rising trendline.
The trendline will act as resistance which comes around 9,600 levels. On the downside trading below 9,100 levels, expect further decline towards 8,800 and then 8,400 levels. However, for the market to move higher recent swing of 9,889 needs to be taken out to move towards 10,550 levels.
In Nifty May monthly expiry options, maximum open interest for Put is seen at strike price 9,000 followed by 8,500 while for Call maximum open interest is seen at 10,00 and 9,500. Nifty options distribution data is suggesting a range of 9,500 and 9,000 for now.
India VIX measure of volatility had seen a sharp decline from 86 to 33 odd levels. Now it is again seeing a bounce back from lower levels and leading to selling pressure in the market. VIX is likely to stabilize at current levels and bounce back from current levels.
Here are the top 5 stocks which can give % return in next 1-3 months:
SRF: Buy | CMP: Rs 3655 | Stop loss: Rs 3,460 | Target: Rs 4,260 | Return: 16%
The stock witnessed a sharp decline from an all-time high of 4,260 in February this year to a low of Rs 2,467. Overall, the chemical industry has seen recovery from lows including SRF. The stock has crossed key Fibonacci 61.8% retracement of fall 4,260-2,467 which comes at 3,574. The rally has been on bullish body candles indicating buying interest in the stock.
Currently, the stock is consolidating in a narrow range after the up move that typically happens in an uptrend. Price has crossed short as well as long-term averages on the daily chart and trading above it. Relative strength index has given positive crossover with its average on the weekly chart. Thus, the stock can be bought at current levels and on dips to Rs 3600 with stop loss below Rs 3,460 for a target of Rs 4,260 levels.
HDFC Life Insurance Company: Buy | CMP: Rs 491 | Stop loss: Rs 465 | Target: Rs 565 | Return: 15%
The stock had seen a major decline from all-time high of Rs 646 in this January to recent low Rs 340 in March. Price has taken support around its previous consolidation low of Rs 340. It has bounced back to current levels and consolidating in a range of Rs 520 to Rs 450 odd levels. The 20-day moving average was acting as resistance for the stock which has been crossed by stock and consolidating above it. Relative strength index has given positive crossover with its average on daily as well on the weekly chart.
Thus, the stock can be bought at current levels and on dips to Rs 482 with stop loss below Rs 465 for target of Rs 565 levels.
Escorts: Buy | CMP: Rs 716 | Stop loss: Rs 680 | Target: Rs 825 | Return: 15%
On the long term monthly chart, the stock seems to be forming bullish inverted head and shoulders pattern with right shoulder in progress. The recent decline which is part of this larger reversal pattern was on below-average volumes than previous up move high volumes. After the bounce back from Rs 526 to Rs 793, the price has corrected to current levels.
It has formed bullish pole and flag pattern on the daily chart and now showing signs of breakout on the upside. Relative strength index and Stochastic have given positive crossover with their respective averages on the daily chart. Thus, stock can be bought at current levels and on dips to Rs 705 with stop loss below Rs 680 for a target of Rs 825 levels.
Axis Bank: Sell | CMP: Rs 395 | Stop loss: Rs 415 | Target: Rs 335 | Return: 18%
The stock has seen a major decline from Rs 760 to Rs 324 odd levels in February-March months. Recent bounce back rally has retraced 38.2% Fibonacci levels and seen reversal down. Price has broken the rising trend line connecting the bounce back lows. MACD line has given a negative crossover with its average on the daily chart below equilibrium level of zero.
Thus, the stock can be sold at current levels and on the rise to Rs 402 with stop loss above Rs 415 for a target of Rs 335 levels.
Havells India: Sell | CMP: Rs 513 | Stop loss: Rs 539 | Target: Rs 435 | Return: 18%
The stock is in downtrend forming a lower top and lower bottom on the daily and weekly chart. Recent bounce back has been facing resistance at Rs 560 odd levels and failed to move above on the second attempt. Last few days of decline is suggesting bounce back rally is over. The stock is suggesting a resumption of the downtrend.
MACD line has given a negative crossover with its average on the daily chart below equilibrium level of zero. Thus, stock can be sold at current levels and on the rise to Rs 520 with stop loss above Rs 539 for a target of Rs 435 levels.
The author is Head of Technical and Derivatives, Sanctum Wealth Management.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.