By Hadrien Mendonca
Pre-Budget extravagance continues on Dalal Street! The market extended its dream run further as indices recorded rose for the eight consecutive weeks.
Largecaps gained momentum as midcaps continued to underperform. Steady corporate earnings so far have kept investors' confidence intact and led to further buying which propped up the indices to fresh lifetime highs almost every day of the week.
The Nifty recovered sharply in the last hour of trades on Friday; however, daily chart analysis indicates the index formed a Doji candle stock pattern on Thursday followed by a Hanging Man kind of candlestick pattern on Friday.
These are signs of uncertainty and also a possible reversal may be on the cards going forward.
With the Union Budget to be announced next week it is advisable to remain cautious and sticking to stock specific activity should be adhered to in the short term.
Bank Nifty too recovered towards the end of Friday’s session thanks to private banks like HDFC Bank, ICICI Bank and IndusInd Bank which showed immense strength.
On the other hand, PSU banks failed to hold on to gains despite the mega infusion announcement by the government.
Here is a list of stocks that can deliver up to 6-12% returns in the short term:
Vedanta: BUY| Target Rs388| Stop Loss Rs329| Returns 12.4%
The stock has been consolidating for over past four weeks and has finally broken out from a Classic Cup and Handle pattern on the daily chart.
The 13-DEMA has proved to act as a very strong support every time the stock declined. With Vedanta closing above the neckline of Rs340, it marks a fresh buy signal according to Dow Theory.
In addition, volumes have also accompanied the overall price up move which further accentuates our bullish stance on the stock. We expect Vedanta to rally towards its potential target of Rs365.
Reliance Industries Ltd: Target Rs 1025, Stop Loss Rs 938, Returns 6.2%
Reliance Industries (RIL) has been consolidating for over 12 weeks now and has finally broken out from the Channel pattern on the weekly chart. Volumes have also accompanied the price outburst on the weekly basis.
In addition, the relative strength has also reversed from the 60 mark indicating that the current momentum is likely to extend further. We expect, RIL to move higher towards its potential medium-term target of Rs 1025.
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Coal India Ltd: BUY| Target Rs328| Stop Loss Rs286| Returns 9.6%
Coal India is a classic retracement play. The stock had broken out from a Cup and Handle pattern two weeks back. Since hitting highs of Rs 311, Coal
corrected and retraced back to the breakout zone of Rs 286 in the previous week. The current move saw the stock once again finding support at the breakout level and rebounded sharply.
In addition, the relative strength also reaffirms our bullish stance on the stock. We expect Coal India to rally towards its potential target of Rs 328 in the medium term.
Disclaimer: The author is Senior Technical Analyst, IIFL. 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.
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