Podcast | Stock picks of the day: Upward moves in Nifty likely to be capped at 10,900

We believe Nifty has strong support around 10,500-10,550 levels which is the confluence of the 50 percent retracement of the entire pullback off October low (10,005–11,118) and long-term upward sloping trend line drawn adjoining December 2016, October 2018 lows placed around 10,500 levels.

Pullbacks are likely to be capped at 10,900 as it is the confluence of a) 61.8% retracement of past eight session decline (11,118-10,585) and b) prior week’s high.

The Nifty midcap, small-cap indices have witnessed buying support near their October lows after eight-week of decline rendered prices to oversold territory on daily, weekly stochastic oscillator.

Historically, both indices have not corrected for more than 14 months and 12 months, respectively. In the current context, with 13 months corrective phase behind us, we believe both indices are approaching their price wise, time wise correction maturity, aiding to form a base over the next few weeks, which will eventually set the stage for a rally.

Here is a list of top 2 stocks which could give 12-15% return in the next 6 months:

Bajaj Finance: Buy| LTP: Rs 2606| Target: Rs 2990| Stop Loss: Rs 2470| Return 15%| Time Frame 6 months

The share price of Bajaj Finance has been trading in a rising channel since mid of CY 2016 signalling a strong demand at elevated levels. During the past two weeks, prices have retraced 61.8% of earlier two weeks up move (2737 - 2355).

The slower pace of price retracement along with equivalent time-wise consolidation signifies robust price structure that augurs well for the next leg of the up move.

The stock has rebounded from the lower band of the channel during January 2019 that coincides with 200-days SMA (at 2440).

Going ahead, we believe dips towards Rs 2470 should be used as an incremental buying opportunity as it is a confluence of the following technical observation:

a) 200-days moving average is placed at Rs 2440
b) 61.8% retracement of the recent up move @ Rs 2500
c) lower band of the rising channel, placed around Rs 2420 levels
Among the oscillators, the weekly 14-periods RSI has been inching upward which supports the positive bias in the stock. We believe that the share price of Bajaj Finance has undergone a secondary phase of consolidation that bodes well for a further acceleration of upward momentum towards Rs 2990 being the upper band of the rising channel in placed since mid-2016.

Praj Industries: Buy| LTP: Rs 140| Target: Rs 157| Stop Loss: Rs 124| Upside 12%| Time Frame 1 months

The share price of Praj Industries is at the cusp of a triangular consolidation breakout signalling resumption of the up move after six weeks of consolidation thus offering fresh entry opportunity.

The stock witnessed a strong up move in the last two months from 100 to 164 levels after consolidating for 6 weeks. The entire consolidation has taken the shape of a symmetrical triangle.

The short-term support for the stock is placed at Rs 124 as it is the confluence of the 50-days EMA coinciding with 61.8% retracement of the previous up move (112-147) placed at Rs 124.

The up move on Tuesday’s session was accompanied by strong volume and the daily 14-periods RSI which has generated a bullish crossover above its 9-periods average thus supports the positive bias in the stock.

We expect the stock to maintain its positive bias and head towards 158 in the coming month as it is the price parity of the previous up move from Rs 120 to Rs 147 which added to the recent trough of Rs 131, thus projecting upside towards Rs 158 in the coming month

(The author is Head Technical, ICICI Direct.com Research)

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