On the upside, the Nifty needs to sustain 10,800 for the uptrend to continue towards 11,100 and then possibly 11,350.
After five consecutive days of gains, the Nifty finally snapped as the market slipped in the last hour of trade on July 8. The index closed at 10,706, down by 0.87 percent. Broader market indices BSE Midcap and Smallcap outperformed the benchmark, with a loss of 0.39 percent and 0.43 percent, respectively. The market breadth was in favour of the bulls with an advance-decline ratio of 4:5.
The Nifty has been forming higher top and higher bottom pattern since its March low of 7,511, thus leading to a rising wedge pattern on the daily chart. For the last three days, the index has been facing resistance above 10,800 and formed and formed a bearish body candle. Hence moving below July 8's low of 10,676, the Nifty is likely to correct towards 10,550-10,450 zone, where supports are seen. However, reversal current will be seen once it breaks below 10,194. On the upside, 10,800 needs to be sustained for the uptrend to continue to 11,100 and then possibly 11,350 levels.
In the Nifty July monthly expiry options, maximum open interest for Put is seen at strike price 10,000 followed by 9,500 while for Call maximum open interest is seen at 11,500 followed by 10,500. Thus, the Nifty options distribution data is suggesting a range of 10,500 and 11,000.
India VIX was holding above 28-29 in the month and is now trading at 26.10 levels. With VIX sustaining below 29 levels, the Nifty is likely to sustain at high levels. However, above 29, the market is likely to see selling pressure emerge.
Here are Top 5 stocks that are a good bet for a one-three months time frame:
Natco Pharma: Buy | CMP: Rs 685 | Stop loss: Rs 650 | Target: Rs 790 | Return: 15%
Following a decline in February and March, the stock hit a low of Rs 403. Subsequently, it rallied back to a high of Rs 665 in April. Since then, the stock has been in sideways range consolidating gains. Over the last couple of months, the stock has formed a rounding base between Rs 570 and Rs 665 odd levels. Volumes since the March low have been high indicating accumulation at lower levels. A few days back, the stock gave a breakout on the upside with good momentum and volumes.
The Average Directional Index (ADX) line has moved above the neutral level of 20 with Plus Directional line rising on the daily chart, indicating the start of an uptrend. Thus, the stock can be bought at current levels and on dips to Rs 672 with stop loss below Rs 650 for a target of Rs 790.
Dr. Lal Path Labs | Buy | CMP: Rs 1762 | Stop loss: Rs 1680 | Target: Rs 2030 | Return: 15%
From March low of Rs 1,180, the stock had rallied to Rs 1680 levels. For the last couple of months, the stock had been consolidating its gains between Rs 1,500 and Rs 1,680. Now the stock has seen a breakout on the upside, with strong momentum indicated by bullish body candles and high volumes indicating buying participation in the stock.
MACD line turned up from the equilibrium level of zero on the daily as well the weekly chart, pointing to an uptrend emerging after a sideways period. The relative strength index (RSI) and Stochastic have given positive crossover with their respective averages on weekly chart. Thus, the stock can be bought at current levels and on dips to Rs 1,735 with stop loss below Rs 1,680 for a target of Rs 2,030.
Biocon: Buy | CMP: Rs 402 | Stop loss: Rs 378 | Target: Rs 475 | Return: 18%
The stock has formed a bottom between Rs 360 and Rs 210 levels over 20 months. In April, the stock witnessed a breakout from the base with strong momentum and high and is trending higher since. For the last five weeks, the stock has been consolidating in a narrow range of Rs 400-Rs 378 before the next leg of the uptrend. Thus, holding above the consolidation of Rs 378, the stock is likely to see a breakout on the upside. The stock can be bought at current levels and on dips to Rs 395 with the stop loss below Rs 378 for a target of Rs 475.
ICICI Bank: Buy | CMP: Rs 369 | Stop loss: Rs 350 | Target: Rs 425 | Return: 15%
In February and March, the stock saw a decline from Rs 551 to Rs 268. Since then, it has been consolidating in the Rs 385 to Rs 268 range at lower levels. On the weekly chart, the stock has formed a double-bottom reversal pattern. Volumes have been high at lower levels, indicating accumulation in the stock. After a recent rally from the lower end of the range, the stock formed higher lows, leading to an ascending triangle pattern on the daily chart.
MACD has given a positive crossover with its average above equilibrium level of zero on the daily chart. Thus, stock can be bought at current levels and on dips to Rs 363 with stop loss below Rs 350 for a target of Rs 425 levels.
Rallis India: Buy | CMP: Rs 262 | Stop loss: Rs 245 | Target: Rs 315 | Return: 20%
The stock has seen multi-year consolidation between Rs 300 and Rs 140 levels for almost five years. Recent rally from the lower end of the range has been on high volumes, indicating buying participation in the stock. For the last couple of weeks, the stock has been consolidating in Rs 280-Rs 255 range before the next leg of an upmove.
The Average Directional Index (ADX) line has moved above the neutral level of 20 with Plus Directional line rising on the daily chart, indicating the start of an uptrend. Thus, stock can be bought at current levels and on dips to Rs 257 with stop loss below Rs 245 for a target of Rs 315 levels.
The author is Head of Technical and Derivatives, Sanctum Wealth Management.Disclaimer: The views and investment tips expressed by experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.