By Dharmesh Shah ICICI Direct.com Research
The Nifty snapped a three-day winning streak and formed a ‘Bear’ candle which carries lower high and lower lows for the first time in eight sessions indicating a pause in the momentum and paves the way for an another round of consolidation in the coming sessions.
The current pullback off September lows has occurred at a slower pace as the index has taken nine sessions to retrace about 75 percent of its preceding seven-session fall (10178 to 9687).
The slower pace of recovery highlights a corrective nature of the pullback which corroborates our view of further time wise consolidation going forward.
We expect the Nifty to oscillate between the broad range of 9700 and 10100 levels while the focus will shift to stock specific action as we enter into Q2 earnings season.
The September 2017 low of 9687 is placed at the crucial value area of 9650-9700 region where the market has absorbed major negatives over last two months highlighting the presence of strong demand at the confluence of following:
• Monthly low of August 2017 is placed at 9685
• Previous resistance zone and the breakout area of June 2017 consolidation is placed around 9700 region
• 61.8% retracement of the June - Sept up move is near 9700
The broader markets have relatively outperformed the index during the recent corrective phase as well as during the current pullback highlighting the stock specific action in the market.
Going forward, we expect the broader markets to extend relative outperforming streak while the index extends time wise consolidation phase.
Here is a list of top three stock which could give up to 15% upside in 3 months:
Godrej Industries: BUY CMP – 608 | Target Rs680| Stop Loss Rs560| Return 15%| Time Frame 1 month
The share price of Godrej Industries remains in an established uptrend, consistently forming higher highs and higher lows on all time frames.
We believe the corrective decline of July 2017 life high of Rs699 provides an incremental buying opportunity in the stock to ride the next up move.
The stock attracted strong demand at its key value area of Rs560 region as it is the confluence of lower band of rising channel encompassing entire up move since December 2016 till date and 50% retracement of the last rising segment was also placed around Rs560 region.
The identical lows formed in August and September 2017 represent a potential double bottom around the major value area of the Rs560 highlighting presence of strong demand to own the stock.
We believe the stock offers good entry opportunity after a decent price wise and time wise consolidation over the last two months. We expect the stock to resolve higher from here on and head to challenge its life high placed around Rs699 levels over the coming month
Tata Power: BUY CMP – 81| Target Rs92| Stop Loss Rs75| Return 14%| Time Frame 3 months
The stock witnessed a steady up move during December 2016 to March 2017 rallying from a low of Rs67 in November 2016 to its 52-week high of Rs91 in March 2017. After the strong up move, the stock entered into corrective phase to work off the excesses developed in the major up move.
The corrective price decline from the 52-week high of Rs91 got anchored near key value area of Rs75-78. Formation of bullish hammer candlestick pattern on the weekly chart during previous week at the major support area of Rs75-78 signals a potential reversal of trend and offers a fresh entry opportunity to ride the next up move in the stock.
Time-wise, the recent corrective consolidation has already taken 27 weeks against the preceding 18 weeks up move from Rs67 to Rs91, which was price wise retraced by just 61.8%. Shallow price wise correction and elongated time wise consolidation highlights the robust price structure.
We expect the stock to enter an uptrend and head towards Rs99 over the medium term as it is the price parity of the previous up move from Rs67 to Rs91 (91-67=24 points) added to the recent trough of | 75 projects upside towards Rs99 (75+24=99) in medium term
Century Plyboards: BUY CMP – 264| Target Rs298 | Stop Loss Rs242| Return 14%| Time Frame 1 month
The stock witnessed a steady up move during January-June 2017 rallying from Rs169 to Rs314. After the strong up move, the stock entered into corrective phase to work off the excesses developed in the previous rally
The two distinct lows formed in May and September 2017 around Rs240 represents a potential Double Bottom formation at the major support area being the confluence of the long-term 52-weeks EMA and 50% retracement of previous up move (Rs155–314).
The strong up move during the current week from support area signals reversal of the corrective trend. The stock is likely to test Rs298 levels being 80% retracement of the previous decline (314-236)
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.
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