Use rallies towards 10,600 to initiate shorts on Nifty; 3 stocks which could give up to 12% return

The Nifty50 saw a decent recovery during the beginning of the truncated week and tested the crucial resistance of 10,620 – 10,640 zones.

Of late, the sell-off in the US market along with the sharp fall in dollar-rupee pair weighs on our market. As a result, the Nifty corrected sharply in the last two trading sessions and eventually concluded the week with a nominal loss of 0.33 percent.

During the previous week, the Nifty formed a Dragonfly Doji pattern and the impact of the said pattern was seen during the initial part of the week.

The said candle pattern was neither confirmed nor negated. On a contrarian side, the monthly chart formed a Bearish Engulfing candle and the said pattern will be activated once Nifty starts sustaining below the candle low of 10,276.

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Aditya Agarwal

Head Technical Research|Way2Wealth Brokers Pvt Ltd

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At this juncture, the Nifty is broadly trading in a range of 10,600 – 10,640 on the higher side; whereas, the lower band is pegged near 10,300 - 10,275. And, either way, breakout or breakdown will dictate the near-term direction of the index.

However, the short to medium term outlook remains on the negative side and any pullback towards 10,640 levels can be used to exit from trading longs and initiating fresh short positions.

A close below 10,300 will further intensify the selling pressure and in that scenario, nifty can test 10,120-10,040 levels.

Here is a list of top three stocks which could give up to 12% return for the next 15-20 trading sessions:

Bharti Airtel: Buy around Rs 430 – 425 | Target: Rs 480| Stop loss: Rs 400 | Time frame: 15 - 21 sessions | Return 12%

The stock has corrected sharply from its all-time high of around Rs 561; however, the fall got arrested near Rs 403 as this level coincided with the weekly 89-EMA along with the upward sloping trend line drawn on a weekly line chart.

The previous week candle resembles a Bullish Hammer pattern and said pattern was activated on Thursday as the stock closed tad below the candle high of Rs 428.20.

The Higher Top Higher Bottom formation at this juncture is still intact. The weekly RSI (14) has signaled an oversold condition. Hence, we advocate traders to accumulate this stock in a range of Rs 430 to Rs 425 with a price target of Rs 480 with a stop loss placed below Rs 400 on a closing basis.

Voltas: Buy around Rs 615 – 610 | Target: Rs 655 | Stop loss: Rs 590 | Time frame: 15 - 21 trading sessions | Return 6%

The stock confirmed its breakout from falling trend line and rallied higher. Subsequently, profit booking was seen from higher levels that dragged the stock towards Rs 550 levels.

However, the stock found support near the said trend line hence we termed this corrective move as a pullback. In line with expectation, the momentum resumed, and stock surpassed its previous swing high.

On the weekly chart, Dragonfly Doji pattern confirmed as the stock closed well above the pattern high of Rs 591. Hence, we maintain our bullish view on Voltas and recommend traders to buy this stock in a range of Rs 615 to Rs 610 with an ups side price target of Rs 655. A stop loss should be placed below Rs 590.

M&M Financial Services: Sell around Rs 430 | Target: Rs 400 | Stop loss: Rs 444 | Time frame: 15 - 21 trading session | Return: 6%

After correcting from its all-time high of Rs 514; stock consolidated and formed symmetrical triangle pattern on daily chart. On Thursday, stock confirmed its breakdown by breaching the lower band of the triangle.

The daily RSI (14) suggests that the stock is poised for another round of correction. Therefore, we advise traders to build a short position in this stock with a price target of Rs 400. A stop loss should be placed above Rs 444.

Disclaimer: The author Head Technical Research, Way2Wealth Brokers Pvt. Ltd. The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.