Derivative data indicates that heavy put writing in the strike prices of 10,700-10,800 should lend support.
On February 7, 2018, which was the RBI Policy Announcement day, Nifty made a high at 11,118 but found resistance on upward sloping trendline adjoining previous tops on the daily charts.
Nifty formed a “Doji” candlestick pattern on the daily chart. This move was followed by a big red candle on the very next session of Friday. This development indicates weakness in the index for the short term. The level of 11,118 has turned out to be a strong resistance for the Nifty.
Nifty has formed a major bottom at 10,583 on January 29, 2019 and rallied towards 11,118 on February 7, 2019. If we consider this 535 points upswing in the Nifty, 50% retracement of the same comes at 10,850.
The support of 200-DMA is placed at 10,855 in Nifty, which coincides with the Fibonacci levels. But, the index breached this support on Tuesday as it closed at 10,831, down 57 points.
In the broader market, midcaps and smallcaps have not been able to find their foot in the market and are facing continuous selling pressure.
Nifty Midcap and Smallcap indices have closed at the lowest level since October 26, 2018. To conclude, we believe that Nifty is still in a choppy trend. Derivative data indicates that heavy PUT writing in the strike prices of 10,700-10,800 should lend support.
On the higher side, immediate resistance is seen in the vicinity of 11,000-11,100 level at which Calls have been written.
Here is a list of top three stocks which could give 8-10% return in the next 1 month:
Tech Mahindra: Buy| LTP: Rs 805.35| Target: Rs 885| Stop-loss Rs 760| Upside 10%
The stock has recently registered a new 52-week high of 818 with higher volumes. IT sector has been outperforming for the last two months. The stock has already posted its quarterly results which were good.
The stock has broken out from the bullish “Flag” pattern on the monthly charts. It is trading above all important moving averages, indicating uptrend on all time frames.
Kotak Mahindra Bank: Buy| LTP: Rs 1298| Target: Rs 1400 | Stop-Loss: Rs 1247 | Upside 8%
The stock has been forming higher tops and higher bottoms on the daily charts. It has moved above all important moving average parameters. The Nifty private sector Index has been showing a great amount of strength in the recent uncertain scenario.
Kotak Bank carries one of the highest weight in the Index and is expected to do well in the coming times. Indicators and oscillators have also turned bullish on the short to medium term charts.
ITC: Buy| LTP: Rs 275| Target: Rs 298 |Stop-loss Rs.265 |Upside 8%
The stock has formed multiple bottom at 268 odd levels in the last 1 year. On Monday, the stock formed a bullish “Hammer” candlestick pattern on the daily chart, indicating bullish trend reversal for the short term.
For the last four months, the stock has been consolidating in the range of 268 and 297 range. Recently, it touched its lower band of the range, indicating possible bounce from the current levels.
(The author is Senior Technical & Derivatives Analyst, HDFC Securities)Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.