Dharmesh Shah
Equity benchmarks snapped their five-week winning streak last week and formed a small bearish candle carrying a higher high and higher low with sizeable upper shadow, indicating profit booking at higher levels. In line with our view, the Nifty maintained its rhythm of not forming more than five weekly bull candles as the current round of profit-booking emerged precisely after five week’s rally from March lows (9,952-10,785).
Going forward, we expect the Nifty to form a strong base in the broader range of 10,500–10,750 and eventually move out of the upper band of consolidation (10,750) to head towards 10,950 levels. We expect the index to continue with its base formation in the broader range of 10,750-10,500 in the near-term, with stock specific activity remaining in focus amid elevated volatility as we approach the upcoming Karnataka elections.
The ongoing secondary consolidation phase forms part of the larger degree uptrend and offers an opportunity to accumulate quality stocks in a staggered manner. Therefore, any throwbacks towards 10,500 should be used as an incremental buying opportunity in quality stocks as it is a confluence of:
- 38.2% retracement of the last upmove from 9,952 to 10,785 at 10,467
- Last two week’s low is placed at 10,515 levels
Structurally, the overall bias remains positive as we are witnessing an improvement in the broader structure since the current upmove is the largest (833 points) in magnitude compared to the previous two pullbacks (362 and 337 points).
The broader consolidation would make markets healthy. We see gradual formation of a higher base that would set the stage for the index to head towards its extended target of 10,950, as it is:
- Higher band of its rising channel placed around 10,950 levels
- 80% retracement of its entire major fall (11,172–9,952) placed at 10,928 levels
Bajaj Finserv: Buy: CMP: Rs 5350 | Target: Rs 6,095 | Stop loss: Rs 5,190 | Return 14%| Time frame: 6 months
The stock after registering a life high of Rs 5,790 during September 2017, has entered into a secondary corrective phase as it discounted excesses built in the previous rally and factored in concerns over rising bond yields etc.
The share price has recently resolved out of past six month’s basing pattern, signalling the end of the corrective phase and commencement of fresh up leg, thus providing fresh entry opportunity.
The price decline from a lifetime high and subsequent consolidation phase over the past six months fulfill all properties of a corrective pattern within a primary uptrend as it retraced the preceding four months’ rally just by 50 percent over seven months indicating robustness in the price structure
Significantly, the consolidation over past six months anchored at the key support of Rs 4800 as it is the confluence of:
a) 50 percent retracement of the previous up move (Rs 3801-5790)
b) The long-term rising 52 weeks EMA, which has been held since CY 2013
The stock has immediate support at Rs 5,200 as it is the 61.8 percent retracement of the most recent rally.
We expect the stock to resume uptrend after the current consolidation breakout and head towards Rs 6,100 in the medium term as it is the confluence of the breakout implication (5450-4800=650 points added to breakout of Rs 5450) and 123.6 percent external retracement of September 2017 – February 2018 decline (5790-4500) placed at Rs 6,095
Kalpataru Power: Buy | CMP: Rs 491 | Target: Rs 570 | Stop loss: Rs 448 | Return 15% | Time Frame: 6 months
The share price of Kalpataru Power has seen a stupendous, multifold rally since CY13. The stock recorded an all-time high of Rs 535 in January 2018. Since then, it has undergone a healthy corrective phase in the last 14 weeks.
It saw a base formation around the key value area of Rs 400-420. Structurally, the entire up move since November 2016 till date has occurred in a well-defined rising channel. It highlights a robust up move amid persistent demand to own the stock at elevated levels.
The stock recently witnessed a rebound from the support area and has registered a breakout above the trendline joining previous highs signalling a reversal of the secondary corrective phase and resumption of a fresh up move.
Thus, it provides a fresh entry opportunity for the medium term. Among oscillators, the weekly 14 period’s RSI is seen taking support near its previous low, thus supporting the positive bias in the stock in the medium term.
Based on the above technical observation we expect the stock to head higher towards Rs 570 in the medium term as it is the 123.6 percent external retracement of the entire previous decline (Rs 535 to Rs 400), which also coincides with the higher band of the rising channel around Rs 570.
Visaka Industries: Buy | CMP: Rs 765 | Target: Rs 875: Stop loss: Rs 720 | Return 14% | Time frame: 1 month
The share price of Visaka Industries has been trading in an upward sloping channel formation signalling strong demand at elevated levels
Over past three months, the stock found support from 200 DMA on multiple occasions, indicating buying demand near key value area of 200 DMA highlighting a structural positive bias in the stock.
While intermediate support remains at Rs 720 being the recent consolidation breakout level and the trendline support joining previous lows.
Among oscillators, MACD indicator continues to inch upward, indicating positive momentum
We believe the stock is likely to head higher in the near-term towards Rs 875 as it is the higher band of the rising channel containing the recent up move since February 2018.
Disclaimer: The author is Head Technical, AVP at ICICI Direct.com Research. The views and investment tips expressed by investment experts 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.
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