ICICI Direct.com Research
The Nifty consolidated in a narrow band within previous sessions' high/low range, resulting in an inside bar pattern on the daily chart. Over the last two sessions, the index is seen marking time above Monday’s bullish gap area and the breakout area of August 2017 high.
The Nifty behaved precisely in line with our expectations and conquered the previous life-time high of 10,137. Going forward, we expect the index to remain on a rising trajectory and head towards a target of 10,400 in coming weeks.
The market has absorbed persistently flaring up geopolitical tensions and FII outflows while forming a higher base at the lower band of the expanding channel during the recent corrective phase in August 2017.
The price wise equality with last rising segment from 9,448 to 10,137 (689 points) measured from a recent trough of 9,685 projects upside towards 10,400 regions.
The placement of upper band of expanding channel currently placed near 10400 makes this the likely target for the current up move.
The key highlight during the recent consolidation phase has been the strong outperformance of broader markets. The NSE midcap and small-cap indices have rallied 12% and 16%, respectively, from their August lows and hit new highs ahead of the benchmark.
Going forward, we expect the benchmark to catch up with the broader markets and extend the ongoing up move with banking, auto, and capital goods sector leading the current up move.
We believe the immediate support base for the index has shifted upwards to 9900 regions being the confluence of lower band of the expanding channel in place since April 2017 and the value of rising 50 days EMA currently placed at 9900 levels.
Here is a list of top five stocks which could give up to 21% upside in 6 months:
Reliance Industries: BUY| Target Rs942| Stop Loss Rs798| upside 11%| Time Frame 6 month
The oil & gas space has emerged as the major dark horse in the market wide up move over the last one year. The sector which had remained a prominent laggard since the downturn of 2008 has witnessed change fortunes and is back on investors’ radar as it has actively participated in the ongoing up move.
The BSE oil & gas index rose to an all-time high in April 2017. The oil & gas behemoth Reliance Industries has also witnessed a major turnaround in long-term price structure as it has catapulted past its previous lifetime high of |820 (adjusted for bonus) after a gap of nine long years.
After testing the previous life high in August 2017, the stock consolidated below the same over last one month. We believe this higher base building process has acted as a launch pad for the eventual thrust past the previous life high.
The share price has emerged out of long-term hibernation by decisively conquering its 2008 life high of |820 in the current month thereby triggering a bullish structural turnaround on the long-term price chart.
The entire up move since January 2017 till date has occurred in a well-defined rising channel highlighting a structured up move and sustained demand at elevated levels. The stock took support at the lower band of this rising channel during the August consolidation.
The up move in the current week has seen the stock register a breakout from one-month consolidation and in the process decisively closed above its 2008 highs. We believe the stock has concluded its long-term consolidation phase and is set to embark upon its fresh uptrend and offers good investment opportunity from a medium-term horizon.
We expect the stock to enter into a sustainable uptrend and head towards Rs944 over the medium term. The price wise equality with the last rising segment (Rs643 to 827 = 184 points) added to the base of August 2017 consolidation (760+184=944) projects upside towards Rs944 for the current up move over the medium term.
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Punjab National Bank: BUY| Target Rs170| Stop Loss Rs129| Upside 19%| Time Frame Six months
The share price of PNB is attractively poised near the key value area providing a good entry opportunity with favourable risk/reward from a medium-term perspective. The corrective decline from 52 weeks high of Rs185 in May 2017 got anchored near the key value area of Rs135 in June 2017.
The stock bounced back to Rs164 level in July 2017 before once again revisiting the support zone in August 2017. Over the last five weeks the stock is undergoing a base formation precisely above the key value area of Rs135 which is the confluence of following:
The lower band of rising channel marking equality with November-December 2016 fall is placed at Rs135. Rising 52 week EMA is currently placed around Rs142, 61.8% retracement of the last rising segment is also placed around Rs139 levels.
The two distinct lows formed in June and August 2017 near Rs135 levels represents a bullish Double Bottom formation precisely at the major value area.
It indicates steady demand emerging above the key support zone ahead of the impending reversal on the price front. The base formation over the last five weeks has laid the foundation for the next up move.
Therefore, we believe the stock is attractively poised above its key value area and offers good buying opportunity with a favourable risk/reward to ride the next up move over the medium term
We expect the stock to resolve higher from here on and retrace the May-June 2017 decline by at least 80 percent over the coming month thereby providing upside towards Rs175 region over the medium term horizon.
Asian Granito: BUY| Target Rs615| Stop Loss Rs457| Upside 21%| Time Frame 6 months
The share price of Asian Granito India has remained in a secular uptrend since May 2014 as it continues to form a higher peak and higher trough in all time frames.
Within this structural uptrend, the stock has undergone periodic phases of consolidation providing fresh entry opportunities for investors to ride the uptrend.
We believe the sideways consolidation over the last 10 weeks has approached maturity and the stock provides a good entry opportunity with a favourable reward/risk set up for medium-term investors to ride the next up move within the larger uptrend.
The stock witnessed a strong rally in June-July 2017 rallying from a low of Rs333 to its all-time high of Rs500 in just 7 weeks. Thereafter, the sideways consolidation over last ten week has taken the pictorial shape of a bullish rounding formation as highlighted in the adjoining weekly chart.
The stock is currently at the cusp of the rounding pattern breakout thus offers fresh entry opportunity to ride the next up move in the stock
The key observation of price action reveals that the rallies since March 2017 has become bigger in magnitude than the preceding up move as the up move during June 2017 from Rs 333 to Rs500 (Rs500-333=167 points) was bigger in magnitude than the preceding rally of March 2017 (| 277-392=115 points).
On a similar basis, the current rally from August 2017 low of Rs380 is likely to be larger in magnitude than the preceding up move of 167 points. The price rallies getting bigger and swifter is a hallmark of the bull phase and corroborates the bullish view on the stock.
We expect the stock to continue with its current uptrend and head towards Rs620 in the medium term as it is the measuring implication of the rounding formation being the width of the pattern ( 500-380=120 points) added to the neckline of the rounding formation thus projects upside towards Rs620
Oberoi Realty: BUY| Target Rs615| Stop Loss Rs402| Return 10% Time Frame 6 months
The most prominent pattern on the weekly chart of Oberoi Realty is the breakout from Bullish Triangular consolidation pattern, which triggers fresh upward momentum and offers the opportunity to ride the next up leg.
The share price has remained in a sustained uptrend as marked by rising peak and trough formation and one of the outperforming stocks within realty space. The recent consolidation post-May 2017 peak of| 416 is anchored upon long-term 52-week EMA and took the form of a bullish triangular continuation pattern.
In early September, the share price broke out of this triangular pattern (Rs416-335). A subsequent retest of the breakout (Rs395) during last week, in the form of incremental buying support, corroborates the breakout and, thus, the bullish stance.
We have projected the target of Rs466 over the next three months based on pattern implication of the Triangle continuation pattern. The range of largest leg of Triangle (416-335=81 points) as projected from the breakout level of | 395 (395+81=476) is projected at Rs 476Disclaimer: 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.