Gradually, Nifty will head towards last five week’s identical high of 10650, as it coincides with 50% retracement level of entire fall from January peak (11172-10142), placed at 10656.
By Dharmesh Shah
Equity benchmarks witnessed a subdued session and settled at 10,366 levels. Since January 2018 peak, we have observed that index has seen up move over three consecutive sessions, in line with that, the market took a breather on Tuesday after three sessions rise.
In the last five sessions, Nifty has retraced 61.8% of earlier six days fall, indicating weak pullback, suggesting a round of a couple of day’s consolidation in a range of 10300 – 10450 levels.
a) 50% retracement level of recent pullback (10142 -10479)
b) The lower band of February’s consolidation range
Thus, any breather towards 10300 should be used as an incremental buying opportunity in quality stocks. Going ahead, we expect that the ongoing consolidation in the range of 10300 - 10450 would set the stage for next leg of a pullback.
Gradually, Nifty will head towards last five week’s identical high of 10650, as it coincides with 50% retracement level of entire fall from January peak (11172-10142), placed at 10656.
Therefore, 10450 would be the key level to watch out for as it is a confluence of:
a) The placement of falling channel (drawn adjoining recent lows of 10398 – 10303 and projected from high of 10632) around 10445
b) 61.8% retracement level of the last leg of fall (10632 – 10142) placed at 10444 coming session
Structurally, the recent decline of 490 points was smaller than the last leg of the fall of almost 896 points, indicating a deceleration of selling pressure near key support zone of 10100–10000.
After the first leg of the fall of 896 points, the Nifty retraced over 360 points. Thus, a comparatively bigger magnitude of pullback from here on would be the first signal of structural strength.
The Nifty and Nifty Midcap indices had broken out of their February lows whereas Nifty small cap managed to hold above it, indicating relative strength. At the same time, the Nifty small cap index has taken support from the lower band of a long term rising channel and bounced back.
Hence, we expect broader market to outperform amid the stock specific action. At the same time, we expect the index to hold the earmarked support of 10000 –10100 and form a base in the range of 10000 -10450.
Here is a list of top three stocks which can give up to 21% return in the next 6 months:
Titan Company Ltd: BUY| CMP Rs865| Target Rs1048| Stop Loss Rs768| Return 21% Time Frame 6 months
The stock witnessed a strong rally in the CY17 rallying from a low of | 297 to its all-time high of | 824. In the process, the stock witnessed a faster retracement of its last major decline as the 22-month decline was completely retraced in just seven months.
At present, stock confirmed the rising channel breakout (containing the entire price activity since March 2011 till date) by retesting it on the monthly chart, signalling a structural turnaround in favour of the bulls on the long-term chart.
The key support base for the stock is placed around Rs770 region as it is the trend line support joining previous lows December 2016 (Rs307) and October 2017 (Rs582), which also coincides with the recent trough of February 2018 thus making it a major support for the stock.
The key observation of price action reveals that the previous rally during December 2016 lows (297-654=357 points) has become bigger in magnitude than the preceding February 2014 – January 2015 rally (203- 444=241 points).
Further, the decline during September-October 2017 (| 654-564=90 points) is lower in magnitude compared to September–November 2016 decline (444-297=147 points).
The price rallies getting bigger and swifter while declines becoming shallower, is a hallmark of the bull phase and corroborates the bullish view on the stock.
Considering the robust price structure and above-mentioned technical observations, we expect the stock to continue its current uptrend and head towards Rs1048 in the medium term where current up move from December 2017 low of Rs773 would achieve price parity with the previous major rally from Rs564 to Rs839 (839-564=275 points).
Godrej Properties: BUY| CMP Rs758| Target Rs850| Stop Loss Rs715| Return 12% Time Frame 1 months
The share price of Godrej Properties was consolidating in a broader range of 728–859 over two months. During two months consolidation, the stock has taken support from the gap area of January 8, 2018, on multiple occasions, indicating sturdy base formation around 728
Currently, it registered a breakout from falling trend line is drawn adjoining subsequent high of 912–849 supported by above average volumes, indicating termination of an intermediate correction.
Among oscillators, RSI found support from one-year long support base of 35 and pointing upward, confirming base formation.
The stock is likely to head higher in the near-term towards | 850 as it is the placement of identical highs coinciding with an upper band of broader consolidation range of | 859 - 728
NCC: BUY| CMP Rs126| Target Rs147| Stop Loss Rs115| Return 17% Time Frame 1 months
The share price of NCC has undergone a secondary phase of correction, in which it found support from 102 levels as it is the 61.8% of the last leg of the rally from September 2017–January 2018 of 81–141, placed around 104, corroborating with 200 DMA placed at 104
At present, the stock has bounced back after finding support from regression trend line (drawn adjoining subsequent January 2018 highs of 141 and 132) placed around |115, indicating a resumption of the primary uptrend.
On the oscillator front, RSI indicator has been inching upward, indicating inherent structural strength, augur well for next leg of up move.
The stock is likely to head higher in the near-term towards 147 being the 123% external retracement level of the current decline (141-102), while support remains near 50% retracement level of the current up move (102–130) around 115.
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.