By Pritesh Mehta
The Nifty is back around the critical pressure point of 9,140-9,200. We have seen the index struggling around these levels on previous occasions. However, in Thursday’s trade, it confirmed a move above three-digit Gann number of 9,160, follow-up buying above the same is required for an index to break through strong supply barrier of 9,140-9,200.
A pick-up in momentum was seen in the last 30 minutes ensured a record closing high for the index. In the process, it settled with gains for the consecutive third session and it also recorded a fourth consecutive series which ended in green (expiry to expiry basis).
Despite a topsy-turvy move in last two weeks, the recent trend of staging a recovery from the support of its 5-day EMA continues to remain intact. Since the last week of December 2016, the index has not registered a weekly close below its 5-day EMA, which undermines the strength in the recent phase of consolidation.
Meanwhile, divergence trend is seen between Nifty and Bank Nifty, wherein, Bank Nifty is trading into the uncharted zone; while Nifty is still hovering below the recent high of 9,218. It is imperative for Nifty to break above 9200 for projecting further levels on the upside.
Top four stocks to buy from IIFL Wealth & Asset Management based on various technical parameters
IOC: BUY above Rs 374| Target Rs 404| Stop Loss 360| Upside 8 percent
IOC went through a corrective phase since the first week of February 2017. However, it could be termed as a sideways correction as it managed to find support around 50 percent retracement mark of the entire rally from the previous breakout point of January 2017, providing an opportunity to enter the stock.
Stocks which are trending higher tend to find support at declines and also recover sharply from such corrective movement. Inability to sustain above the midpoint of three-digit Gann channel of 401 saw the stock retracing back to the lower-end of the channel.
Recent low of Rs 366 is also placed near the 45 degree by applying Gann square of 9 from the recent high of Rs 404. It suggests that downside move of the stock has come to an end and the stock is likely to resume its previous upmove.
On the weekly chart, the stock has bounced back from the support of its 13-WEMA. Traders can buy IOC above Rs 374 with a stop loss of Rs 360 and a target of Rs 404.
Cairn India: BUY above Rs 302| Target Rs 330| Stop Loss 289| Upside 10%
It is currently going through a phase of consolidation at the top of its rally. It is showing the trait of a stock which is in a strong uptrend. It is moving higher along with the support of its 13-WEMA since July 2016, wherein every pullback towards this critical moving average has resulted into buying opportunity.
Since the last five weeks, the sideways consolidation at the top of its trend can be termed as bullish consolidation. The outcome of such sideways movement are dealt positively during an uptrend.
Moreover, it continues to trade above the Gann number of Rs 289. Sustenance above the same for the last one month suggests that the stock has moved into a new orbit.
However, the fresh breakout from the recent sideways activity above Rs 302 would provide the much ammunition for the stock to ascend higher. Based on above parameters, we recommend a buy on Cairn India above Rs 302 with a stop loss of Rs 289 for a target of Rs 330.
Torrent Pharma: BUY| Target Rs 1,630| Stop Loss Rs 1,450| Upside 9.5 percent
For the last six months, the stock went through a sharp period of correction as it declined after making a peak of Rs 1,770 back in August 2016. It made a low of Rs 1,194 in November 2016 and thereafter it went into a period of consolidation.
The sideways movement from November 2016 to March 2017 has smoothly transitioned into a rectangular pattern. Such patterns in trading mean consolidation or indecision among the market participants.
In this particular case, after a long period of indecision, the price broke out from the upper barrier placed around Rs 1,450, suggesting bullish breakout.
Gann analysis suggests that the stock has entered into a new orbit on the upside above Rs 1,510. The midpoint of the current Gann channel i.e. Rs 1,450 would be the line of support.
The same coincides with the breakout point of the above-mentioned pattern. So, traders are advised to buy with a stop loss of Rs 1,450 and upside potential is seen till Rs 1,630.
Engineers India: SELL| Stop Loss Rs 151| Target Rs 130| Return 9 percent
The stock is underperforming against the market since January 2017. It made a high of Rs 172, however, inability to sustain above Gann number of 169 led to a strong reversal. During the second week of March 2017, it provided some respite from 50% retracement of the entire move from Rs 118 to Rs 172.
However, the recovery turned out to be short-lived as the stock made a high of Rs 157 and again resumed its earlier downtrend. In Thursday’s trade, it gave a breakdown below the support of rising ascending trendline (which is in place since May 2016).
The overall structure since the peak of December 2016 is taking the form of a downward sloping channel, suggesting weakness in the medium term.
Moreover, it also confirmed a close below its 13-WEMA post the false breakout attempt as well as below the midpoint of current Gann channel. Short Engineers India Apr Futs below Rs 145 with SL of Rs 151 for a target of Rs130.
Disclaimer: The author is Head of Technicals Research – IIFL Wealth & Asset Management. 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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