Nifty to move in 9700-9950 range; 4 stocks which can give up to 25% upside in 6 months

In the entire up move since January 2017, intermediate corrective phases have not lasted more than 3-4 weeks post which the index has resumed the uptrend.

Based on this tendency, we expect current consolidation to conclude over the coming one week post which the index should resume upward momentum.

The broader markets represented by mid cap and small cap space have attracted demand at lower levels after the initial cool off in the current week. We expect the broader markets to relatively outperform the benchmarks amid the ongoing consolidation.

Sectorally, metals, auto and FMCG stocks have relatively outperformed the benchmark during the current corrective phase implying the inherent strength and robust price structure.

We believe the recent cool off in banking space has also created fresh entry opportunities.

Here is a list of top 4 factors which can give up to 25% upside in next 6 months:

Maruti Suzuki: BUY| Target Rs8440| Stop Loss Rs7200| Upside 11% Time Frame 6 month

The share price of Maruti Suzuki has been a strong outperformer in the auto space as it strides northward in a rising peaks and troughs manner on the long term chart amid continued investor participation at elevated levels.

Considering the strong bullish price structure, recent secondary corrective consolidation has helped the stock work off overbought conditions on momentum oscillator and created an attractive entry opportunity to ride the secular bull trend.

The entire up move since November 2016 low (Rs4766) has occurred in a well-defined rising channel highlighting a structured up move and persistent demand at elevated levels.

After hitting its lifetime high (Rs7,920) on 1st of August 2017, the stock has witnessed a gradual corrective decline over the last three weeks and approached closer to the lower band of the rising channel placed at Rs7,350 region.

We believe it is attractively poised after the recent consolidation and provides a fresh entry opportunity with a favourable reward/risk set up to ride the next up move.

We expect the stock to resolve higher from here on and head towards Rs8,440 over the medium term being the 138.2% extension of the previous up move from Rs7,155 to Rs7,920 as projected from the recent trough of Rs7,380 which also coincides with the upper band of the rising channel in place since November 2016. Thus, it opens upsides towards Rs8,440 over the medium-term.

Bharti Airtel: BUY| Target Rs485| Stop Loss Rs392| Upside 13%| Time Frame 3 month

The most prominent pattern that developed on the price chart of Bharti Airtel is the bullish Double Bottom formation at January and November 2016 identical low of Rs282.

The resolute breakout from this pattern in July 2017 triggered a bullish structural turnaround from a medium-term perspective.

On the short-term scale, sideways consolidation over the last five weeks post the strong breakout rally in July 2017 has taken the form of a Flag pattern.

A flag formation is a bullish continuance pattern, which marks a temporary pause after a strong up move as bulls take a breather before continuance of the upward momentum.

The stock has stayed undeterred by market fluctuations over the last five weeks and formed a steady base at Rs405 levels, which is 38.2% retracement of the last rising segment and 50-days EMA currently at Rs403

The breakout from Flag pattern in current week signals resumption of the upward momentum and provides a fresh entry opportunity to ride the next up move.

We expect the stock to head towards Rs485 over the coming months as it is the 123.6% Fibonacci price extension of preceding up move (362 to 431) projected from the recent higher bottom of Rs403. This also coincides with the measuring implication of the bullish double bottom pattern.

Gujarat Gas: BUY| Target Rs890| Stop Loss Rs740| Upside 12%| Time Frame 6 month

The share price of Gujarat Gas has been in a strong up trend since the start of CY17 and rallied from Rs503 to Rs881 levels.

The stock witnessed a major turnaround during March 2017 as it registered a resolute breakout from 18 months consolidation by piercing through the yearly highs of 2015 (Rs680) and 2016 (Rs690).

Thereafter, the stock has consistently moved northwards forming higher highs and higher lows highlighting renewed momentum amid persistent demand at elevated levels.

We believe the sideways corrective consolidation over the last four months has laid the foundation for the next leg of up move within the ongoing uptrend.

The stock entered into a secondary corrective mode after hitting an all-time high of Rs881 in late April 2017. Thereafter, it oscillated in the price band of Rs890 to Rs710 in last four months.

The entire corrective decline since April 2017 high has occurred in a well-defined falling channel marking the lower highs and lower lows.

The up move this week has seen the stock post a resolute breakout past the upper band of the falling channel placed at Rs775, thereby offering a fresh entry opportunity as it implies the end of the secondary corrective phase and resumption of the primary uptrend.

Time wise, the secondary corrective decline inside the falling channel took almost 17 weeks against the preceding 13-week rally from Rs534 to 881, which was price wise retraced by just 50%.

Limited price wise correction and extended time wise consolidation highlights the robust price structure and augurs well for the continuance of the uptrend.

We expect the stock to resolve higher from here on and head towards Rs895 over the medium term being the measuring implication of the current range from Rs815 to Rs735 (815-735=80 points) added to the higher band of the consolidation Rs815 (815+80=895) which also coincides with the all-time high placed at Rs892 levels.

HEG: BUY| Target Rs608 | Stop Loss Rs421| Upside 25%| Time Frame – 6 months

The share price of HEG has witnessed a major turnaround in the long term price structure as it resolved out of a multi-year consolidation during July 2017. The price structure points towards a structural bull phase, going forward.

We believe the ongoing sideways consolidation over the last five weeks has laid the platform for the next up move and provides fresh buying opportunity from a medium term perspective

The share price surged above its previous major peak of January 2010 (| 412), in July 2017 thereby triggering a breakout past seven-year consolidation.

During these seven years, the share price oscillated in the broad range of Rs400-150 while it retraced 2009- 10 rally (Rs94-412) by 80%. The seven-year consolidation against one year rally has resulted in a major price higher bottom formation on long term charts.

The recent breakout from the seven-year consolidation indicates a resumption of structural bull phase for the stock. The sharp up move since the start of the CY17 has seen the stock completely retraced its major decline consuming 28 quarters from March 2010 high of Rs412 to December 2016 low of Rs144 in just three quarters.

The rally was also supported by strong volume participation of more than three times the 12-months average (10 lakh shares) highlighting larger participation in the direction of the trend.

Faster retracement of the major falling segment backed by strong volume participation confirms the positive turnaround in price structure and reinstates the bullish momentum

We believe the stock is well placed to continue its upward trend over the coming months. As the current rally is extending in magnitude we expect the share price to head towards the target of Rs608 as it is the 123.6% extension of preceding rally (Rs251 – 441) as projected from the recent trough of Rs387. It also coincides with the all-time high of January 2008 placed at Rs608 levels

Disclaimer: The author is Head Technical, 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.