Pritesh Mehta
Thursday’s action could well be described as an act of defiance. Despite a sharp decline of nearly 100 points on the Nifty in Wednesday’s session, the index managed to find support around three-digit gann number of 9,010.
The Nifty in Wednesday’s session made a low of 9,019, which also coincides with four-digit gann number. Moreover, 90-degree move from the recent peak of 9,218 is placed at 9,122. So, the confluence of support provided some respite in Thursday’s session and thereby respected the previous breakout point.
However, sell on rallies and buy on declines movement (evident from last week’s activity) has led to a choppy environment on Dalal Street. The choppy market is not an ideal time to make money on the index.
During a period where the market is creating whipsaws within the trading band of 200 points, the current rally would gain credence only on a convincing move above 9,160.
Here is a list of top five stocks to buy based on various technical parameters
United Spirits: BUY| Target Rs 2,350| Stop Loss Rs 2,150| Upside 7%
United Spirits went through a phase of sharp decline in the last one month as it corrected from the peak of Rs 2,428 and made a minor swing low of Rs 2,114. However, selling pressure came to an end after the stock found support around the 50% retracement mark of the entire move from Rs 1,820 to the recent high.
The same also coincided with the midpoint of current four-digit gann channel (i.e. Rs 2,117). Also, an appearance of morning Doji star candle pattern is seen on the daily chart, which makes this stock more attractive around these levels.
It is a reversal pattern, which is bullish in nature, and ideally takes place at the end of the downtrend. The pattern suggests that Thursday’s rally could last for few more days.
Multiple points of support has resulted into a strong pullback and we expect the recent momentum to continue towards Rs 2,350 in the near term. Traders can buy United Spirits above Rs 2,200 with a stop loss of Rs 2,150 and a target of Rs 2,350.
MCX: BUY| Target Rs 1,355| Stop Loss Rs 1,170| upside 8 percent
MCX had a torrid time from December 2016 until early February 2017, as it declined from Rs 1,413 to a low of Rs 1,086. However, harmonic set-up on the daily chart showed bullish implications of ABCD pattern.
The stock took support around the lower-end of the four-digit gann channel (1,086) before entering into a period of consolidation at the bottom. In Wednesday’s session, it confirmed a move from the recent consolidation zone and also a breakout from the downward sloping trendline.
Selling pressure exhausted around the support of its long-term ascending trendline (in place since February 2016). The same also coincides with the support of its 50-WMA. The confluence of support between Rs 1,070-1,090 provided a base for the resting phase, which is likely to act as strong support in the medium term.
Based on above rationales, IIFL recommends a buy on MCX above Rs 1,220 for a target of Rs 1,355 with a stop loss of Rs 1,170.
Wipro: BUY| Target Rs 550| Stop Loss Rs 490| Upside 8 percent
IT stocks have been consolidating at lower levels. But Wipro appears to be an early leader on the technical charts. It under-performed for the entire period of 2015 as the price broke below the support of the ascending trendline and it made a low of Rs 408 (back in November 2016).
The presence of 100-Monthly moving average and midpoint of the previous gann channel resulted in an exhaustion of selling pressure. Moreover, multiplication of 90 degrees by applying a square of 9 from the significant high of Rs 678 was placed around Rs 400.
After that, it went through a period of consolidation and gradual recoveries. On the weekly time frame, the stock regained control above its downward sloping trendline as well as its 187-DMA, which suggests that the stock has put in a major turnaround.
IIFL expects the stock to continue its recent momentum after it confirmed a breakout from rounding bottom pattern on the short-term charts. Traders can buy Wipro above Rs 509 with a stop loss of Rs 490 for the target of Rs 550.
Tata Global Beverages: BUY| Target Rs 166| Stop Loss Rs 144| upside 10 percent
After making a strong bottom of Rs 114 earlier in November 2016, the stock went through a phase of bottoming out. It is a phase win which stock tends to move within a narrow range, without providing any expensive movement either side.
In January 2017, it regained control above its 187-DMA which brought an end to a period of sideways action. Moreover, multiplication of 180 degrees by applying a square of 9 from the significant high of Rs 158 was placed around Rs 112, which led credence to the bottom formed in November 2016.
Post a sharp rally in early January 2017, the stock went entered into another phase of consolidation. The period of sideways action faced hurdle around the midpoint of the current gann channel (i.e. 145).
However, price volume breakout was confirmed in Thursday’s trade as the stock staged a rectangular pattern breakout. Based on above-mentioned parameters, IIFL expects the stock to witness follow-up buying in next few sessions. Traders can buy the stock above Rs 151 with a stop loss of Rs 144 and a target of Rs 166.
Federal Bank: BUY| Target Rs 102| Stop Loss Rs 83 | Upside 16 percent
Federal Bank has been consolidating at the top after a strong rally between December and February 2017. From the last one month, it has been moving sideways between Rs 83 and Rs 89.
However, in recent phase of consolidation, the stock continues to find support around its 21-DMA. On several occasions, it staged a rally in last few weeks from the critical moving average support.
In fact, the same is acting as a strong support since January 2017. Moreover, it continues to trade above the 2-digit gann number of 81, implying strength in the recent sideways phase.
Since it is an up trending stock, traders should always use any phase of consolidation and also breakout from the same to build a long position. A confirmation of a move above Rs90 would result in an upside breakout and the stock could attempt Rs 102 in the medium term.
Based on above rationales, IIFL recommends a buy on Federal Bank above Rs 88 with a stop loss of Rs 83 and a target of Rs 102.
(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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