Nifty to test 200-DMA if 10,398 breaches; 5 stocks which could give up to 11% return

The Nifty50 was stuck in a range of 10,450-10,600 for the week ended February 16. It witnessed buying at lower levels but couldn’t break the 10,600 levels on the upside and saw some bit of selling pressure and closed flat.

The index which closed at 10,454 levels for the week ended 9 February slipped marginally to close at 10,454 for the week ended February 16. But, the low of 9th February which is 10,398 levels becomes the sacrosanct support for the index at least in the short term, suggest experts.

If the index slips below 10,398 level in the coming week then it is more likely to test its 10,276 levels which were recorded on 6th February when Nifty witnessed a slid of 168 points in the second week of February. The 200-days moving average is placed at 10,050 levels.

Also, in the last couple of weeks, the dependence on US markets increased substantially at least for the opening proceedings. On all four occasions during the truncated week gone by, our markets opened higher but mostly the picture changed as we approached the closing point.

Having said that, the Friday’s session clearly had one-way traffic as we saw index kept on descending throughout the session to conclude at its lowest point of the week.

“The intraday volatility seems to have increased and this is what we call it as ‘Choppiness’. At the end, the market did not go anywhere as we saw few false breakouts from intraday range on either side,” Sameet Chavan, Chief Analyst, Technicals & Derivatives at Angel Broking told Moneycontrol.

Due to last week’s consolidation, we can see a defined range of 10650 – 10398 for the index going forward. “On the daily chart, we can see a formation of ‘Inverted Pennant’ in the making. A slide below 10398 would confirm the pattern and in this scenario, we can expect to retest of 10200 – 10033 levels in days to come,” he said.

Chavan further added that on the flipside, a move beyond higher end (10650) would provide some relief rally; but it certainly does not change the ‘Sell on Rise’ strategy in the near term as we are yet to see a complete impact of the ‘Bearish Engulfing’ pattern formed during the ante-penultimate week.

Traders are continuously advised to remain light and should ideally avoid any kind of bottom fishing in the near term. In between we are likely to see some bounce backs; but this time, a possibility of these rallies getting sold into is quite high, suggest experts.

Here is a list of top five stocks for the coming week which could give up to 11% return in the short term:

Brokerage Calls from SMC Global Securities Ltd

Hindustan Zinc Ltd: BUY| Target Rs336| Stop Loss Rs285| Time 1-2 months| Return 7%

The stock closed at Rs 313.05 on the 16th February 2018. It made a 52-week low at Rs 226.85 on 25th May 2017 and a 52-week high of Rs 331 on 23rd October 2017.

The 200-day Exponential Moving Average (EMA) of the stock on the daily chart is currently at Rs 293.67. The stock has witnessed massive rally from Rs 180 to Rs 330 levels and registered all-time high in a single upswing.

Then after, the stock is consolidating in the range of Rs 260-320 levels and forming an “Ascending Triangle” pattern on weekly charts which is considered to be bullish.

Although, the stock has not given the pattern breakout the bias is looking positive for the stock. Therefore, one can buy in the range of Rs 305-308 levels for the upside target of Rs 332-336 levels with a stop loss below Rs 285.

HUL: BUY| Target Rs1470| Stop Loss Rs1260| Time 1-2 months| Return 9%

The stock closed at Rs 1,352.10 on the 16th February 2018. It made a 52-week low at Rs 837.50 on the 17th February 2017 and a 52-week high of Rs 1,410 on the 30th January 2018.

The 200-day Exponential Moving Average (EMA) of the stock on the daily chart is currently at Rs 1,215.68. As we can see on charts that stock is continuously trading in higher highs and higher lows sort of “Rising Channel” on weekly charts which is bullish in nature.

Apart from this, technical indicators such as RSI and MACD are also suggesting buying the stock. So, we can anticipate further buying from current levels. Therefore, one can buy in the range of Rs 1,320-1,330 levels for the upside target of Rs 1,440-1,470 levels with a stop loss below Rs 1260.

Trading calls from Sameet Chavan, Chief Analyst, Technicals & Derivatives at Angel Broking:

MCX: BUY| Target Rs825| Stop Loss Rs700| Return 11%

This has been a wealth, destroyer over the past one year and has now reached its multi-year support zone of Rs 700. The relentless fall from Rs 960 got arrested last week as the stock managed to recover from the new ’52-week low’ of Rs 671.75 and then went on to form a ‘Morning Star’ pattern on daily chart.

This pattern has a bullish implication and indicates short-term reversal. In addition, the ‘Bullish Hammer’ on the weekly chart has been confirmed, which we believe would provide further impetus to the probable relief rally.

Thus, we expect a decent retracement of this recent severe correction. One can look to go long for a reasonable target of Rs 825. The stop loss now can be fixed at Rs 700.

Larsen & Toubro Ltd: SELL| Target Rs1280| Stop Loss Rs1355| Return 3%

The heavyweight stocks have been the main pillars of the entire gigantic rally we witnessed over the past fourteen months.

However, of late, these marquee names have started showing some exhaustion and with FIIs again turning sellers in equity segment, have already seen decent correction over the past couple of weeks.

‘Larsen & Toubro’ is no exception to this and due to Friday’s selloff, we can see a breakdown from the ‘Inverted Pennant’ on the daily chart. The broader structure does not change but in the near term, we expect this weakness to extend a bit.

We consider this as a good shorting candidate and hence, recommend selling this stock for a target of Rs 1,280 by following a strict stop loss at Rs 1,355.

DHFL: SELL| Target Rs510| Stop Loss Rs553| Return 5%

In the last couple of years, the entire ‘Housing Finance’ basket has given tremendous returns and ‘DHFL’ has been one of the outperformers within this space.

However, currently, the stock is undergoing its corrective phase and looking at last few days’ price development; we expect this correction to continue in the near term as well.

Technically speaking, the ‘Lower Top Lower Bottom’ formation is visible on daily chart and Friday, the stock prices started correcting precisely after retesting its breakdown point of Rs 575. Traders can go short on this stock for a target of Rs.510 by following a strict stop loss at Rs 553.