RIL, Prism Cements, Firstsource Solution among top 3 stocks which could give up to 15% return

The pullback off February low (10276) is at a slow pace, as the Nifty retraced six session’s fall (11172 to 10276) by just 38.2% over eight sessions. Even Nifty midcap & smallcap indices have seen a shallow pullback, retracing 50% of the last leg of declines.

The slower pace of up move warrants prolonging of ongoing consolidation, before directional move emerges. Panic bottom of February 2018 at 10276, which is an immediate support is placed at the confluence of:

* Upward rising trend line joining lows of September 2017 (9688) and December 2017 (10033) currently placed near 10350

* 80% retracement of December-January rally, placed at10294

Structurally, we believe the current decline is part of a bull market. Empirical evidence makes us believe the 10100-10000 zone will attract a decent buying support:

Since CY10, on four instances, intermediate corrections following seven to nine weeks of consecutive higher high lows, measured 9-12%, leading way to a resumption of the uptrend. In the present scenario, after seven weeks of higher high low, similar magnitude of correction project strong support around 10000

*Gujarat election panic low of 10075 coinciding with placement of 200 DMA at 10071

Here is a list of three stocks which can give up to 15% return in the next 6 months:

Reliance Industries: BUY| CMP – 929| Target Rs1070| Stop Loss Rs865| Return 15% Time Frame 6 months

The share price of Reliance industries continues to consolidate in a broad range of 970 - 870 over four months, indicating base formation for the next leg of up move.

Currently, the stock is sustaining above a cluster of short term and medium term moving averages, thus providing fresh entry opportunity to ride the next up move in the stock.

The overall positive structural trend still remains intact as the five weeks of a rally during September to October 2017 from Rs785 to Rs960, went through nine weeks’ time wise correction, got retraced by 50% of the entire leg of up move.

The limited price wise correction corresponding to elongated time correction shows inherit strength and foretell positive momentum, going ahead.

Among the oscillators, the daily RSI has generated a bullish crossover above its nine period’s average thus supports the positive bias in the stock in the short term.

The above-mentioned technical evidence suggests the four months’ consolidation is likely to conclude, in turn, giving a fresh entry opportunity.

We expect the stock to move higher towards the projected target of Rs1070 in the medium term being the price equality of the last leg of up move from Rs779– 958 as projected from the recent trough of Rs895.

(Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.)

Firstsource Solution: BUY| CMP Rs48| Target Rs53| Stop Loss Rs43.70| Upside 12%| Time Frame 1 months

The share price of First Source Solution is at the cusp of a major trend line breakout joining the high of July 2016 (53.65) and January 2018 (48.25) placed around 47.50 levels signalling strength and provides fresh entry opportunity.

The stock has recently seen a faster retracement of the last falling segment as three weeks decline from 48 to 37 was completely retraced in just two weeks indicating strength and robust price structure.

The recent up move was accompanied by a strong volume of almost double of the 50 weeks average volume of 182 lakhs shares per week. The weekly MACD in an uptrend and is seen taking support at its signal line thus supports the positive bias.

The stock is likely to head higher towards 54 levels being the price parity of the previous major up move from 31 to 48 as projected from the recent trough of 37 levels.

Prism Cement: BUY CMP – 125| Target Rs142.00| Stop Loss Rs114| Return 13%| Time Frame 1 months

The share price of Prism Cement is in strong uptrend forming a higher peak and higher trough in the long-term chart. The stock formed an all-time high of Rs159 during January 2018, since then it has witnessed a corrective decline in the last five weeks and is currently placed near major support area thus provides fresh entry opportunity.

The stock is forming a base around the major support area of 115 - 120 as it is the short-term trend line support joining the previous major lows since December 2016 (73) and the 52 weeks EMA currently placed at 116 levels.

After the current consolidation stock is likely to head higher towards 142 levels being the 61.8% retracement of the entire decline (159 to 115). The weekly RSI is currently placed near its previous lows and is likely to support the pullback in price in coming sessions.

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.