Aditya Agarwal
Last week, the market tumbled nearly three-and-a-half percent and registered its biggest weekly fall in the calendar year 2017. During the week, indices opened on a flat note and the bears surprised the market participants as they entered the market on last Tuesday and put tremendous pressure on the index as a result index sneaks below 10,000-mark.
Subsequently, bears tightened their grip and Nifty saw back-to-back gap down openings and index concluded each session near the lowest point of the day.
The geopolitical tension between the US and North Korea further triggered the sell-off across the globe and in that pessimism Indian market retraced previous four weeks gain in a single trading week.
Technically speaking, Nifty has reversed after testing the Rising Channel formation drawn from the 6,825.80 (March 04, 2016. It also respected the 100% price extension took from the bottom of 6825.80 to 8968.70 (measured from the low of 7893.80) and reversed sharply.
At this juncture, Nifty is trading near its immediate support zone of 9700/9650, as this level coincides with its previous daily resistance zone which has reversed its role post breakout and should act as near-term support.
Also, the 61.8% Fibonacci retracement of its daily swing move from 9,448.75 to 10,137.85 comes near 9,700. Therefore, we believe that the bulls had the last hope as any decisive closing below 9,700/9,650 zone will pull the index lower and the possibility of testing the swing low of 9,448 can’t be ruled out.
The weekly RSI (14) momentum indicator came near 60 levels which may provide some support to bulls. On the other side, in the case of any bounce 9,800/9,910 are strong hurdles for coming trading weeks.
On a medium-term basis, we believe 9,448.75, which coincided with the daily, as well as the weekly swing low, will be a trend decider as any break below this level will breach the sequence of Higher Top Higher Bottom formation and index will eventually confirm the medium-term down trend.
As market has seen a sharp correction in last week and Nifty is trading near it crucial supports, we expect some pullback from current levels that can drive Nifty towards 9,850-9,880 levels.
In Monday’s session, short covering helped Indices to test 9,800 levels in intraday session but it closed below that. Short covering based buying was also seen in some of the battered down counters.
However, we don’t expect this pullback rally to extend beyond 9,900 and from those levels once again bears are expected to take control of markets.
Therefore, we recommend booking profits in trading long positions near 9,900 levels and go short with immediate targets of 9,700 and below that 9,580 will be next targets.
Here is a list of top five stocks which can give up to 25% return in short term:
Infosys: Buy, target Rs 1,230, Stop loss Rs 885 (time frame one to two months)| Return 25%
Looking at the weekly chart, after posting a fresh all-time high of around 1,233 during the early part of June 2016, Infosys reversed sharply and corrected towards 900 levels.
The level of 900 coincided with the multiple support zone first, the previous weekly swing high of early March 2014. Second, the 61.8% retracement of its entire move from the bottom of 672 to the top of 1,233 precisely comes near 900.
In line with expectation, the stock managed to hold the level of Rs 900 and consolidated in a narrow range. In the process, the weekly chart formed a ‘Triple Bottom’ formation. The weekly RSI (14) has formed rising bottom formation during the course of consolidation.
Considering the above evidence, we recommend traders to buy this stock at current level 988 with a price target of 1,230. A strict stop loss should be placed at 885.
Larsen & Toubro (L&T): Sell Target Rs 1,000, stop loss Rs 1,210 (time frame 12 -21 trading sessions)| Return 12%
The stock has seen a sharp rally from the bottom of around Rs 850 and rallied till Rs 1,208. The level of Rs 1,200 coincided with the trend line resistance by joining the peaks of early March 2015 and mid-July, 2015 respectively.
As a result, the stock slipped into a broad consolidation below the said trend line. In that consolidation, we are seeing the formation of a 'Double Top' pattern. The said pattern is a reversal pattern and the neckline of said pattern comes near 1,094.
The daily RSI (14) has indicated a shift in range hence, the possibility of breaching the neckline is quite high. Thus, we recommend traders to build a short position in a range of Rs 1,130 to Rs 1,140 with a price target of Rs 1,000. A strict stop loss should be placed at Rs 1,210.
Petronet LNG: Buy Target Rs 248, Stop loss Rs 192 (time frame 12 to 15 trading sessions)| Return 14%
Looking at the weekly chart, the stock has been in a long protracted uptrend for several years and recently stock registered a fresh all-time high of 229.50 during late May 2017.
Subsequently, stock saw profit booking and gradually corrected lower. The fall got arrested near 200-level as this level coincided with the multiple support zone first, the previous resistance zone which reversed its role (change of polarity rule), 50% Fibonacci retracement of its entire move from the bottom of 163 to 229.50 comes near 200.
Also, the weekly 45-EMA placed near 200. In line with the expectations, the stock took support near said level.
From current levels we expect Petronet to resume its uptrend and recommend to enter in long positions at the current level of 211 and use any dip towards Rs 207 to add further with a price target of Rs 248. A stop loss should be placed below Rs 192.
Marico: Sell Target Rs 295, Stop loss Rs 338 (time frame 8 to 10 trading sessions)| Return 7%
On the daily chart, Marico has confirmed its breakout from triangle pattern during an early part of July 2017. However, it failed to hold its gains post the breakout and entered inside the Triangle pattern.
We term such moves a Bull trap which is a bearish sign. The daily RSI (14) momentum indicator signalled range shift during last week. Hence, we advocate building short position in a range of Rs 320 to Rs 325 with a price target of Rs 295. A stop loss should be fixed at Rs 338.
Bharti Infratel: Buy Target Rs 435, stop loss Rs 356 (Time frame 15 to 21 trading sessions)| Return 14%
The stock has seen a decent rally from the bottom of around Rs 270 and hit a fresh 52-week high of Rs 425. Subsequently, it witnessed profit booking and tested the daily 89-EMA placed near Rs 378.
Looking at the daily chart, the stock has formed a Bearish Divergence and now the daily RSI (14) indicates an oversold condition.
On the weekly line chart, Infratel has precisely tested its previous resistance zone which should act as an immediate support.
Hence, we recommend traders to buy this stock at the current level of Rs 382 with a price target of Rs 435 and stop loss of Rs 356.
Disclaimer: The author is Head Technical Research, Way2Wealth Brokers Pvt. Ltd. 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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