The sharp rally in Nifty of over 8 percent during October 2017 pushed the weekly stochastic oscillator to the highly overbought reading of 91, thereby warranting a pause in upward momentum. The index has already corrected its October rally (9,687-10,490) by 50 percent amid profit booking in recently run up stocks.
We believe current round of profit booking will make the market healthier by working off short-term overbought conditions as suggested by a daily stochastic oscillator which has plunged to an extreme oversold reading of 5 and thereby creating a fresh buying opportunity.
We expect the Nifty to find the support in the vicinity of 10,000-10,100 as it is the confluence of key retracements and equality with preceding decline (10,178-9,687).
Going forward, we expect the index to enter into a consolidation zone of 10,000-10,300 and eventually head higher towards 10,600 in the coming month.
The overall price structure remains bullish as the index continues to form rising peaks and troughs in the weekly/monthly time frame.
The most recent October rally (9,687 to 10,490 = 803 points) was larger in magnitude compared to last rising segment of July-August 2017, measuring 689 points.
The rallies are now getting bigger which highlights persistent demand at elevated levels. It augurs well for the continuance of the up move going forward.
Here is a list of top 3 stocks which could give up to 19% return in 6 months:
Abbott India: BUY| CMP Rs4982| Target Rs5950| Stop Loss Rs4495| Return 19%| Time Frame 6 month
The share price of Abbott India has undergone a healthy corrective phase over the past two years and now looks poised to resume its primary uptrend, thus providing a fresh entry opportunity from a medium-term time horizon.
The share price has been in a corrective phase since its September 2015 peak of Rs6177 as it retraced its three-fold rally during 2014-2015.
After early signs of bottoming formation near the key support of Rs4000, the share price rallied above an intermediate swing high of Rs5040 during current week resulting in a faster retracement of last falling segment.
A faster retracement of falling segment indicates culmination of corrective phase and revival of bullish bias in the stock.
The share price retraced its 11-month corrective decline (Rs5040-4001) in just two months, thus signaling turnaround in price structure and offers fresh entry opportunity.
We expect the stock to resolve higher and challenge its life high of Rs6177 over the medium term. The pattern implication of past eighteen-month consolidation breakout also provides a target in the vicinity of Rs6000 (consolidation range 5000-4000=1000 points) projected above the breakout levels of Rs5000.
GlaxoSmithKline Consumer: BUY| CMP – 6010| Target Rs6700| Stop Loss Rs5680| Return 12%| Time Frame 6 months
The share price of GlaxoSmithKline Consumer remains in a structural uptrend as it continues to stride northward in a rising peaks and troughs manner.
Currently, the stock is seen emerging out of a two-year-long corrective phase that forms part of the larger degree uptrend. We believe the stock is set to embark upon its next major up move, going forward.
Therefore, it provides a good buying opportunity for medium term investors. The stock entered into a secondary corrective phase after hitting a lifetime high of Rs6800 in December 2015.
The price wise correction halted precisely near the key value area of Rs4900 being the 61.8% Fibonacci retracement of the 2013-15 rally (Rs3800 to Rs6800).
The stock witnessed a steady base formation around Rs4850-4900 region towards the end of 2016 before gradually rising to a high of Rs5780 by August 2017. The ensuing correction saw the share price once again revisit the value area of Rs4850-4900 in September 2017.
The two identical lows formed in December 2016 and September 2017 represent a bullish Double Bottom formation highlighting strong demand at the key value area.
We believe the stock has concluded a healthy corrective phase and is set to embark upon its next up move going forward.
We expect the stock to head towards our target of Rs6700 in the medium term as it is the measuring implication of the Double Bottom pattern i.e. the neckline and base of the pattern (5780-4850=930 points) added to the breakout point of Rs5780 projects upside towards | 6700
JK Cement: BUY| CMP Rs1053| Target Rs1175| Stop Loss Rs1015| Return 12%| Time Frame 1 months
The stock remains in a well-established uptrend and continues to inch northwards in a rising peaks and troughs manner in the monthly chart.
Within this structural uptrend, the stock has undergone periodic phases of consolidation providing fresh entry opportunities for investors to ride the uptrend.
The two distinct lows of July 2017 and September 2017 placed around Rs923 region represent a Double Bottom formation, which is a bullish reversal pattern highlighting the strong demand at the key value area of the long-term 52 weeks EMA currently placed at Rs935 levels.
The strong up move in the current week's trade has seen the stock register a resolute breakout above the neckline of the double bottom pattern signaling fresh entry opportunity.
We expect the stock to head towards Rs1235 levels over the coming month being the measuring implication of the double bottom pattern i.e. the neckline and base of the pattern (1079-923=156 points) added to the breakout point of Rs1079 projects upside towards Rs1235Disclaimer
: 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.